• Markets hit new highs – Major U.S. equity markets continue to rally, helped by enthusiasm over AI related stocks and solid consumer spending data. The Dow Jones Industrial Average index pushed back above the 50,000 marker it hit back in February, while the Nasdaq and S&P 500 index both hit record highs today, underpinned by strong performance in the technology sector. This upbeat sentiment helped push the market capitalization of Nvidia to near $6 trillion, while Cerebras Systems, an AI infrastructure company, soared 75% after its initial public offering. In other markets, oil was broadly flat over the day at $102 per barrel as investors continue to watch for further signs of progress in unlocking the important energy supply route through the Strait of Hormuz. Bonds rallied at the start of the session but sold off as the day progressed, particularly at the short end, with the 2-year yield rising above 4% for the first time in more than a year. Finally, the dollar appreciated against a trade-weighted basket of currencies, and gold prices were a touch softer.
   
• Keep calm and carry on spending – Today's retail sales data point to further signs of resilience from U.S. consumers in the face of the latest inflation shock. Headline sales were up for a third consecutive month, with spending in nominal terms rising 0.5% over April. Admittedly, this jump partly reflects higher prices, especially for gas, with the consumer price index rising 0.6% over the month. Still we think the resilience of spending in the face of this shock has been impressive, and we are seeing few signs of consumers cutting back on other types of spending as costs at the pump increase. Indeed, excluding sales at gas stations, spending was up 0.3% month-over-month in this report, and through March and April this type of spending is up 6% in annualized terms. Larger tax refunds are likely supporting this strength in our view, alongside a solid labor market, with today's initial unemployment insurance claims reading still at low levels. It is possible this resilience could be tested by a more prolonged spike in inflationary pressures. However, absent a more severe energy price shock, we think the U.S. consumer looks in good shape to continue spending.
   
• Investors continue to watch Trump-Xi summit – President Trump's state visit to China remains in focus for markets, as investors look for signals around trade policy, the next steps in the Iran conflict, and U.S. policy over Taiwan. The leaders of the world's two superpowers met in closed-door talks yesterday, with Chinese state media reporting that Xi had warned the U.S. its stance over Taiwan could lead to "clashes" and a "highly dangerous situation." However, the tone of today's meetings, which included a range of U.S. business leaders, sounded more upbeat, with Xi signaling a desire to further open up the Chinese economy to international companies and talking positively of the benefit of economic ties between China and the U.S. President Trump also talked up the prospects for a fantastic future between the two countries. It will be interesting to see if this positive rhetoric is followed by news of agreements around tariffs or trade deals after the trip. From a geopolitical perspective, President Trump said that Chinese President Xi would not supply Iran with military equipment, and offered to help the U.S. secure a peace agreement that would reopen the Strait of Hormuz.

James McCann;
Investment Strategy

^{Source for all data: Bloomberg, FactSet.}

• Markets close higher despite hotter-than-expected inflation – Equity markets closed higher on Wednesday even after a producer price inflation (PPI) report came in above estimates, suggesting investors remain focused on resilient growth and strong corporate earnings. As widely expected, Kevin Warsh was confirmed by the U.S. Senate to become the next Federal Reserve chair, succeeding Jerome Powell, who will remain on the Fed Board for now. Bond yields rose, with the 10-year Treasury at 4.47%, likely reflecting some sensitivity to the inflation data and the likelihood that the Fed may need to keep its policy rate steady for longer. Internationally, Asian markets finished mostly higher as investors there likely focused on the Trump-Xi meeting that started today. Meanwhile, the U.S. dollar strengthened against major currencies, consistent with higher bond yields and a less-dovish interest-rate backdrop.
   
• Producer price inflation rises more than expected – Producer price index (PPI) inflation accelerated to 6.0% year-over-year in April, above forecasts for 5.0%. Similar to Tuesday's CPI report, elevated oil prices were a major driver, with energy prices up about 22% from a year earlier and accounting for much of the headline increase. Core PPI, which excludes food and energy, also surprised to the upside, rising to 5.2% year-over-year, compared with estimates of 4.3%. Gains in trade services prices suggest tariffs may be having a larger impact as well. From a corporate earnings perspective, higher input costs could create profit-margin pressure unless businesses can pass along higher costs to consumers. That said, much of the impact appears tied to energy-related price increases, which should prove temporary, assuming oil prices retreat as supply disruptions ease.
   
• Strong earnings season in the home stretch – With about 91% of S&P 500 companies reporting, earnings continue to come in well above expectations. About 84% have beaten EPS estimates by an average upside surprise of 19%. That outperformance has driven a significant upward revision in earnings growth estimates to 26%, compared with 12% at the end of the quarter. If sustained, this would mark the sixth straight quarter of double-digit earnings growth. We believe these strong results demonstrate that fundamentals remain supportive of equity markets, even as inflation risks remain near-term headwinds. Technology is leading earnings growth, up more than 50% year-over-year, reflecting demand from artificial intelligence and cloud-computing infrastructure. Communication services and materials are also posting robust EPS gains of more than 40% from a year ago. With 10 of the 11 sectors posting year-over-year EPS gains, growth has also been broad-based. We believe wide earnings growth should help support more balanced market performance across sectors, help reduce reliance on a narrow group of market leaders, and help strengthen the case for portfolio diversification.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Markets close lower as inflation comes in slightly hotter than expected – Equity markets pulled back on Tuesday as investors weighed an inflation report than modestly exceeded expectations. Sector performance was mixed, with health care and consumer staples leading gains, while consumer discretionary and technology lagged, reflecting a risk-off tone. Bond yields moved higher, potentially reflecting the view that the Fed may remain on the sidelines for longer with inflation elevated. Internationally, Asian markets finished mostly lower overnight, and European markets were also down. In energy markets, WTI oil added to recent gains amid continued disruptions in the Strait of Hormuz. Meanwhile, the U.S. dollar strengthened against major currencies, likely supported by higher bond yields.
   
• CPI inflation rises more than expected – Consumer price index (CPI) inflation rose to 3.8% year-over-year in April, modestly above forecasts for 3.7%. Elevated oil prices were a key contributor, with energy prices up nearly 18% from a year earlier and accounting for much of the increase in headline inflation. Core CPI, which excludes the more volatile food and energy categories, edged higher to 2.8% annualized, compared with estimates of 2.7%. Shelter inflation also rose to 3.3%, from 3.0% through March, partly reflecting a semiannual data refresh that compared against a period of no assumed inflation in October 2025 during the government shutdown. With inflation remaining above the Fed's 2% target for more than five years and the labor market stabilizing, we expect policymakers to keep interest rates on hold in the near term.
   
• Employment data points to firmer job growth – U.S. private employers added an average of 33,000 jobs per week for the four weeks ending April 25, up from 30,250 in the prior report, according to ADP. While the pace of hiring remains modest by historical standards, we believe it should be sufficient to sustain near-full employment, particularly as labor-force growth slows due to tighter immigration enforcement and an aging workforce. As a result, we expect the labor market to remain characterized by slower hiring but limited layoffs, which should keep the unemployment rate contained.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Stocks edge higher to begin the week – U.S. equity markets closed slightly higher on Monday, with the S&P 500 closing at a fresh all-time high and coming off its sixth consecutive week of positive returns. It was a quiet day on the economic calendar, with existing-home sales for April the only major release and results in line with expectations as existing home sales were little changed from the March reading. However, investors will be watching the April consumer price index (CPI) report tomorrow, followed by April retail sales on Thursday, to assess the latest trends in inflation and consumer spending. On the geopolitical front, the U.S. rejected Iran’s counterproposal over the weekend to end the war. Market reaction was fairly muted, with oil prices modestly higher and equities posting slight gains. Bond yields also finished the day higher, with the 10-year U.S. Treasury yield at 4.41% and the 2-year yield at 3.95%.
   
• Price-check ahead – Inflation data will be front and center for investors this week, with the April consumer price index (CPI) report set to be released tomorrow morning. Economists expect headline CPI to rise 0.6% in April and 3.7% on an annual basis, as elevated oil prices continue to feed into headline inflation. Core CPI is expected to increase 0.3% month-over-month and 2.7% year-over-year. With inflation having run above target for the past five years, we expect the Fed to remain on hold in the near term. Additionally, last Friday’s jobs report showed that employment growth has remained solid in recent months, with nonfarm payrolls increasing by 115,000 in April and the unemployment rate holding steady at 4.3%. In our view, the combination of elevated inflation and steady labor-market conditions is likely to keep the Fed in wait-and-see mode before pursuing further monetary easing. However, if energy supply disruptions normalize, we believe the Fed could still deliver a rate cut in the back half of 2026.
   
• Strong earnings growth has overshadowed the war in Iran – After a pullback in March, during which the S&P 500 fell roughly 9% from its prior all-time high, equity markets have rallied since the beginning of April. The S&P 500 has closed higher for six consecutive weeks and recently climbed to new all-time highs. In our view, the sharp rebound has been driven primarily by ongoing de-escalation in the Iran conflict and robust earnings results. With 90% of S&P 500 companies having reported first-quarter results, 84.3% have exceeded analysts’ earnings expectations, above the five-year average of 78%, while the average upside surprise has been 18.6%, also well above the five-year average of 7.3%. For the quarter, S&P 500 earnings are on pace to grow by 26%, with full-year earnings expected to rise by 21%. Given the S&P 500’s 16% rally from its March low, along with lingering uncertainty in the Middle East, we believe a period of consolidation over the coming weeks would be reasonable. However, the longer-term outlook remains supported, in our view, aided by steady economic growth, solid labor-market conditions, and strong corporate profit growth.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Stocks reach another record - The S&P 500 posted its sixth consecutive weekly gain supported by solid employment data and renewed optimism around a potential Iran peace deal. Better‑than‑expected jobs data underscored the economy’s resilience, while oil prices were little changed as markets await Iran’s response to a proposed 14‑point peace plan. The U.S. administration indicated that recent U.S. strikes on Iranian military facilities do not alter the ceasefire status, reinforcing hopes that oil flows through the Strait of Hormuz will resume. Technology shares once again led the market higher, driven by continued strength in semiconductor stocks, while healthcare shares lagged. Meanwhile, the U.S. dollar and Treasury yields were lower on the day, with the 10‑year yield around 4.36%.
   
• Solid job growth eases labor-market concerns - The U.S. economy added 115,000 jobs in April, well above expectations of 55,000, while the unemployment rate held steady at 4.3%. Healthcare and social assistance once again led job gains, but hiring broadened across additional sectors, an encouraging sign of improving labor‑market breadth. Overall, stronger job gains and steady unemployment reinforce the economic resilience narrative. The first back‑to‑back increase in payrolls in nearly a year validates other timely labor‑market indicators that have been signaling not just stabilization, but improvement in employment conditions. These trends remain supportive of consumer spending, even in the face of higher energy costs. With downside risks to the labor market easing, the Fed is likely to remain firmly on hold in the near term as it waits to see how energy‑driven inflation pressures evolve. We still believe one rate cut is possible in 2026, but it would likely come late in the year, assuming energy markets have normalized by then. In the meantime, equity performance should continue to be driven primarily by earnings trends and ongoing AI‑related investment.
   
• Earnings continue to drive market returns - With roughly 80% of S&P 500 companies having reported first‑quarter results, overall earnings growth is now on track to exceed 25%, marking the sixth consecutive quarter of double‑digit earnings growth. This strength has been driven by a combination of solid revenue growth, particularly among technology companies, and historically high profit margins across many sectors. In aggregate, results have largely validated the view that corporate profits remain a key driver of market returns, helping offset a modest decline in valuations this year and providing an important counterbalance to ongoing geopolitical uncertainty. After such a strong advance in stocks, upside and downside risks now appear more evenly balanced in our view, and a pause in the rally would be a reasonable expectation. Even so, the earnings backdrop continues to provide an important cushion. As long as corporate profits keep accelerating, investors have good reason to avoid becoming overly negative and to tune out, rather than react to, the daily headline noise.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg}