Rally Extends Deeper Into Record Territory

For the week ending 8 May 2026

As of midday Friday, global equities traded near record highs amid hopes for an end to the war in Iran and unrestrained AI enthusiasm, as well as on continued solid US economic data. The yield on the US 10-year Treasury note edged down to 4.35% from 4.39% a week ago, while the price of a barrel of West Texas Intermediate crude slid $8.25 to $94.50. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), declined slightly to 18.8 from 19.3.

IRAN CRISIS

Hopes rose this week that Iran and the US will come to an agreement on a memorandum of understanding; this would be followed by a 30-day negotiation toward ending the war. The US is waiting for Iran to respond to its latest proposal. If Iran does not agree to the US’ terms, President Donald Trump said that bombing will resume at a “much higher intensity” than before. Iran said Friday that the proposal is under review.

China, Iran’s main economic lifeline, has begun pressuring Tehran to reach an agreement with the US, a key shift in what has otherwise been a stalemate. Additionally, Chinese regulators have reportedly told the country’s largest banks to temporarily suspend new loans to five oil refiners that were recently sanctioned by the US. This move will likely please President Trump and comes just a week before his planned visit to Beijing.

On Monday, Trump announced — then suspended just 36 hours later — “Project Freedom,” an effort to guide stranded ships out of the Persian Gulf. Shortly after the announcement, Iran fired upon a number of ships, including US naval vessels. Iran then initiated a series of missile and drone attacks on the United Arab Emirates; the US chose not to respond to these strikes in order to maintain momentum for continued peace talks, but this lack of response angered US allies in the region. Project Freedom was suspended after Saudi Arabia and Kuwait denied the US the use of bases and airspace, but the Wall Street Journal reported Thursday afternoon that Saudi Arabia and Kuwait have since lifted those restrictions, presumably after the US assured its allies in the Gulf of higher levels of protection. The US is reportedly aiming to restart Project Freedom as early as this week.

Late Thursday afternoon, Iranian state media reported that the US and Iran had exchanged fire near the Iranian port of Bandar Abbas on the Strait of Hormuz. Iran launched missiles and drones at three US destroyers, and the US said that in response, it struck Iranian launch sites, command centers, and intelligence nodes. No damage to US assets was reported. Within hours of this exchange, Iran initiated a series of additional missile and drone strikes on the UAE, all of which were reportedly intercepted.

Iraq is reportedly offering crude oil priced at about one-third the going rate to buyers willing to load the barrels deep inside the Persian Gulf. The price of crude fell precipitously this week, with Brent falling below $100 per barrel after reaching $126 just over a week ago.

MACRO NEWS

US April payrolls rose more than expected

US nonfarm payroll rose 115,000 in April, handily beating the consensus estimate of 65,000. March’s outsized payrolls gain was revised up to 185,000 from 178,000. March and April were the first two months to post back-to-back 100,000+ job gains since the end of 2024. The unemployment rate held steady at 4.3%. Average hourly earnings were contained, suggesting that there is little inflation impetus from wages. The US labor market has shown remarkable resilience recently, notwithstanding ongoing concerns regarding potential job displacement due to artificial intelligence or the economic repercussions of the conflict in Iran.

US trade court strikes down tariff workaround

After the US Supreme Court struck down the Trump administration’s IEEPA tariffs, President Trump imposed a global 10% tariff under Section 122 of the Trade Act. On Thursday, the US Court of International Trade ruled 2-1 that these new tariffs do not satisfy the criteria specified in the trade law for when import surcharges are allowed. The court didn’t issue an injunction, however, and with the tariffs scheduled to end in July, importers may receive limited short-term relief.

Fed’s Williams says doesn’t see an argument for higher rates

Federal Reserve Bank of New York President John Williams, one of the most influential members of the FOMC, said Monday that the central bank’s current stance balances risks to price stability and full employment amid notable supply-chain disruptions from the Iran war. He sees 2026 US GDP growing between 2% and 2.25% and unemployment staying between 4.25% and 4.5%. Williams’ base case is for inflation to average around 3% this year and 2% in 2027. Stubborn inflation is likely to push back the date for lower rates, he said, while adding that he’s “very comfortable” with the language in the FOMC statement, which maintains an easing bias.

Best earnings growth in decades

Analysts at Deutsche Bank say that Q1 US equity earnings are arguably the strongest in two decades and are unusually strong for a period outside of a post-recession recovery. The strength is widespread, with double-digit growth seen in average and median companies and with all 11 sectors posting positive growth for the first time in four years. Strong earnings are helping megacaps “grow into” their valuations, the analysts said. In addition, FactSet reported that analysts are increasing their Q2 earnings estimates. This is notable because analysts typically lower estimates during the first month of a quarter. The Q2 bottom-up EPS estimate (an aggregation of the median EPS estimates for Q2 for all the companies in the index) increased by 2.1% (to $80.47 from $78.84) between March 31 and April 30.

Trump gives EU until July 4 to finalize trade deal

With the European Union dragging its feet on finalizing the details of its trade agreement with the US, US Ambassador to the EU Andrew Puzder said the US will impose 25% tariffs on European cars and trucks if the deal isn’t ratified soon. On Tuesday, EU trade chief Maros Sefcovic told US Trade Representative Jamieson Greer that the bloc wants the main parts of the agreement in place by July, more than a year after it was first negotiated. After speaking with European Commission President Ursula von der Leyen on Thursday, Trump gave the EU until July 4 to finalize the deal before he raises the tariffs.

QUICK HITS

After a series of holiday-related delays, the balance of global purchasing managers’ indices were released this week. The UK was the standout performer, with all three measures rising significantly.
 

The US became the world’s largest oil exporter in April, overtaking Saudi Arabia. US crude exports are up 30% from pre-war levels, according to Kpler.

US factory orders rose 1.5% in March, beating estimates of a 0.6% advance.

As expected, the Reserve Bank of Australia hiked its cash rate 0.25% this week to 4.35%. Also this week, Norway’s Norges Bank became the first western European central bank to increase interest rates since the outbreak of the Iran war, raising its policy rate 0.25% to 4.25% amid stubbornly high inflation.

OPEC+ announced it will raise its output cap in June by 188,000 barrels per day.

French President Emmanuel Macron nominated one of his closest advisors, Emmanuel Moulin, to head the Bank of France; Moulin will replace Francois Villeroy de Galhau, who is set to retire at the end of May.

Multiple global equity indices closed at record highs this week including the S&P 500, the Nasdaq 100, the Russell 2000^®, the MSCI World Index, South Korea’s KOSPI and Taiwan’s TAIEX.

The Canadian economy lost 17,700 jobs in April while the country’s unemployment rate rose to 6.9% from 6.7% from the month before.

The US Securities and Exchange Commission formally proposed a rule change that would allow companies to file semiannual reports on a new form 10-S in place of the traditional quarterly 10-Qs. Firms would still be required to submit full annual reports. The proposal now goes to a 60-day public comment period. The rule change can be ratified by a majority vote of the SEC.

On Wednesday, the trade ministers of the G7 criticized “economic coercion” by global powers that place arbitrary restrictions on exports, particularly critical minerals, in what analysts called a “clear swipe” at China.

US weekly continuing jobless claims fell to their lowest level in two and a half years in late April, according to data released Thursday.

EARNINGS NEWS

With about 89% of the constituents of the S&P 500 Index having reported, blended earnings per share (which combines reported data with estimates for those that have yet to report), rose an astounding 27.7% compared with the same quarter last year, according to data from FactSet. Blended sales rose 11.3% over the same period.

THE WEEK AHEAD

Monday: US existing home sales

Tuesday: US CPI

Wednesday: Eurozone GDP, industrial production; US PPI

Thursday: UK GDP, industrial production; US retail sales

Friday: US industrial production

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.