The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.37%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.58%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.42%. June E-mini S&P futures (ESM26) rose +0.35%, and June E-mini Nasdaq futures (NQM26) rose +0.42%.
Stock indexes settled higher on Friday, with the S&P 500 and Nasdaq 100 posting 1-week highs, and the Dow Jones Industrials posting a new all-time high. Stocks were supported by hopes that the US and Iran are moving closer to a peace deal. Also, chipmakers and AI-infrastructure stocks rallied amid the unrelenting enthusiasm for artificial intelligence. In addition, Workday rose by more than +5% to lead software stocks higher after reporting better-than-expected Q1 results and offering a positive outlook.
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Stocks fell back from their best levels on Friday after the University of Michigan’s US May consumer sentiment index was revised lower to a record low, and May inflation expectations were revised upward. Also, hawkish comments from Fed Governor Christopher Waller weighed on stocks when he said he supports making clear that the Fed’s next interest rate move is just as likely to be an increase as “inflation is not headed in the right direction.”
The University of Michigan’s May US consumer sentiment index was revised lower to a record low of 44.8 (data from 1978), weaker than expectations of no change at 48.2.
The University of Michigan’s US May 1-year inflation expectations rate was revised upward to a 9-month high of +4.8% from +4.5%, stronger than the +4.6% expected. Also, the May 5-10 year inflation expectations rate was revised upward to a 7-month high of 3.9%, stronger than expectations of no change at 3.4%.
WTI crude oil prices (CLM26) remain extremely volatile and are susceptible to headlines from the Iran war. Prices whipsawed lower and higher on Friday and finished with modest gains as the Strait of Hormuz remains closed. Crude prices fell into negative territory briefly on Friday following a Reuters report that said Qatar has sent a negotiating team to Tehran in coordination with the US to help secure a deal to end the war. Iran said the latest US proposal has “narrowed the gaps” between the two sides. That proposal suggested a short-term deal that would see Iran open the Strait of Hormuz and the US lift a blockade of Iranian ports, with both sides then going into deeper negotiations over Iran’s nuclear program. Also, on Friday, Secretary of State Rubio noted “slight progress” in the negotiations. Late Monday, President Trump said he called off a strike on Iran scheduled for Tuesday after Gulf allies asked for more time to give diplomacy a chance.
Last Wednesday, the International Energy Agency (IEA) said in a monthly report that global oil inventories declined at a rate of about 4 million bpd in March and April, and the market will remain “severely undersupplied” until October even if the conflict ends next month. Goldman Sachs estimates that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, with the drawdown potentially reaching 1 billion bbl by June.
The markets are discounting a 0% chance of a -25 bp FOMC rate cut at the next FOMC meeting on June 16-17.
Earnings season is winding down, and reports thus far have been supportive of stocks. As of Friday, 83% of the 475 S&P 500 companies that reported Q1 earnings have beaten estimates. Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence. Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.
Overseas stock markets settled higher on Friday. The Euro Stoxx 50 climbed to a 2-week high and closed up +0.99%. China’s Shanghai Composite recovered from a 3-week low and closed up +0.87%. Japan’s Nikkei Stock Average rose to a 1-week high and closed up sharply by +2.68%.
Interest Rates
June 10-year T-notes (ZNM6) on Friday closed up +0.5 of a tick. The 10-year T-note yield fell -1.2 bp to 4.558%. T-notes posted modest gains on Friday amid a decline in inflation expectations, as the 10-year breakeven inflation rate fell to a 1-month low of 2.401%. Also, Friday’s downward revision in the University of Michigan US May consumer sentiment index to a record low was supportive for T-notes.
T-notes gave up most of their gains on Friday after Fed Governor Waller said he supports a Fed rate hike if inflation doesn’t soon slow. Also, the upward revision in the University of Michigan’s May inflation expectations rate was bearish for T-notes. In addition, the strength in stocks on Friday curbed safe-haven demand for government debt and is weighing on T-notes.
European government bond yields are moving lower today. The 10-year German Bund yield fell to a 1.5-week low of 3.022% and finished down -6.0 bp to 3.038%. The 10-year UK gilt yield dropped to a 2-week low of 4.887% and finished down -6.8 bp to 4.897%.
The German May IFO business confidence index unexpectedly rose +0.4 to 84.9, stronger than expectations of a decline to 84.2.
The German June GfK consumer confidence index unexpectedly rose +3.3 to -29.8, stronger than expectations of a decline to -34.0.
ECB Governing Council member Alexander Demarco said, “In June, the ECB will probably need to hike interest rates as we need to send a signal that we are committed to our medium-term 2% inflation target.”
UK Apr retail sales ex-auto fuel fell -0.4% m/m, weaker than expectations of -0.3% m/m.
Swaps are discounting an 88% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.
US Stock Movers
Chipmakers rallied on Friday, helping lift the broader market. Qualcomm (QCOM) closed up more than +11% to lead gainers in the Nasdaq 100, and NXP Semiconductors NV (NXPI) closed up more than +5%. Also, Advanced Micro Devices (AMD), Analog Devices (ADI), and Texas Instruments (TXN) closed up more than +3%, and ARM Holdings Plc (ARM), Marvell Technology (MRVL), ASML Holding NV (ASML), KLA Corp (KLAC), and Microchip Technology (MCHP) closed up more than +2%. In addition, Lam Research (LRCX) and Applied Materials (AMAT) closed up more than +1%.
Workday (WDAY) closed up more than +5% to lead software stocks higher after reporting Q1 adjusted EPS of $2.66, stronger than the consensus of $2.51, and forecasting Q2 subscription revenue of $2.46 billion, better than the consensus of $2.45 billion. Also, Atlassian Corp (TEAM) and Intuit (INTU) closed up more than +4%, and Salesforce (CRM) and ServiceNow (NOW) closed up more than +2%. In addition, Datadog (DDOG) and Oracle (ORCL) closed up more than +1%.
Dell Technologies (DELL) closed up more than +16% to lead gainers in the S&P 50 after Wells Fargo Securities raised its price target on the stock to $270 from $180.
IMAX Corp. (IMAX) closed up more than +15% after the Wall Street Journal reported the company is exploring a sale and has approached entertainment companies as potential buyers.
Estee Lauder (EL) closed up more than +11% after its proposed merger with Puig Brands SA fell apart due to compensation demands from Charlotte Tilbury.
Zoom Communications (ZM) closed up more than +9% after reporting Q1 of $1.24 billion, above the consensus of $1.22 billion, and raising its 2027 revenue forecast to $5.08 billion-$5.09 billion from a previous forecast of $5.07 billion-$5.08 billion, better than the consensus of $5.07 billion.
Ross Stores (ROST) closed up more than +8% after reporting Q1 sales of $6.01 billion, stronger than the consensus of $5.61 billion.
Alcoa (AA) closed up more than +7% after UBS upgraded the stock to buy from neutral with a price target of $80.
Merck & Co (MRK) closed up more than +5% to lead gainers in the Dow Jones Industrials after the European Medicines Agency’s Committee for Medicinal Products for Human Use recommended approval of Keytruda in combination with Padcev for the treatment of bladder cancer.
Take-Two Interactive Software (TTWO) closed down more than -4% to lead losers in the Nasdaq 100 after forecasting 2027 net bookings of $8.0 billion to $8.2 billion, well below the consensus of $9.11 billion.
Coinbase Global (COIN) closed down more than -4% to lead losers in the S&P 500 as the price of Bitcoin (^BTCUSD) fell more than -2% to a 3-week low,
Summit Therapeutics (SMMT) closed down more than -4% after Bernstein initiated coverage on the stock with an underperform rating and a price target of $7.70.
Denali Therapeutics (DNLI) closed down more than -3% after reporting that a mid-stage study of an experimental therapy for Parkinson’s disease, with partner Biogen, did not meet its primary or secondary endpoints.
Inspire Medical Systems (INSP) closed down more than -2% after Bank of America Global Research downgraded the stock to underperform from neutral with a price target of $39.
Earnings Reports(5/26/2026)
AutoZone Inc (AZO), Box Inc (BOX), Champion Homes Inc (SKY), CSW Industrials Inc (CSW), Digital Turbine Inc (APPS), Modine Manufacturing Co (MOD), Ooma Inc (OOMA), Semtech Corp (SMTC), Transcat Inc (TRNS), Zscaler Inc (ZS).
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