Stocks Slip From Fresh Highs

For the week ending 15 May 2026

As of midday Friday, global equities pulled back from Thursday’s all-time highs amid a surge in global bond yields. The yield on the US 10-year note jumped 21 basis points from a week ago to 4.56% as oil prices pushed higher over fears of diminishing inventories. The price of a barrel of West Texas Intermediate crude oil rose $10 from last Friday to $104.50. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), rose to 21.4 from 18.8.

US–CHINA SUMMIT

US President Donald Trump and China’s President Xi Jinping met in Beijing on Thursday, kicking off a two-day summit between the leaders of the world’s two largest economies. Expectations were modest heading into the meeting, with a continued trade détente anticipated. Per the Chinese state media, Xi warned Trump regarding Taiwan that “if mishandled, the two nations will experience collision or even clashes, pushing the entire China–US relationship into a highly dangerous situation.” US Secretary of State Marco Rubio said Taiwan did not feature prominently in Thursday’s talks, however.

An American readout of Thursday’s meeting said the leaders discussed expanding market access for US businesses and that Xi indicated interest in purchasing more US energy and agriculture. The two leaders also discussed ways to address the flow of fentanyl precursors and agreed Iran should not obtain a nuclear weapon. Trump described the talks as “extremely positive and productive,” later adding that Xi wants to see the Strait of Hormuz reopened and offered to help, while also pledging to not send weapons to Iran.

Overall, the summit focused on fostering strategic stability, though it lacked significant breakthroughs.

MACRO NEWS

US–Iran stalemate continues

President Trump summarily rejected Iran’s latest counterproposal for ending the war in the Middle East. Iran proposed postponing nuclear talks until a later date, retaining sovereignty over the Strait of Hormuz and requiring the US to lift its blockade, unfreeze assets and pay war reparations, among other demands. Before leaving for Beijing, Trump said the fragile ceasefire in the region is “on life support.” Admiral Brad Cooper, head of the US Central Command, testified before Congress on Thursday that Iran has roughly 10% of its missile and drone capabilities remaining, dismissing a report from late last week suggesting that Iran has retained 70%-75% of its arsenal. This week, Iran also expanded the territory it considers part of the Strait of Hormuz. This newly claimed territory extends the strait's functional width from its historical 20-30 miles to 200-300 miles.

Warsh confirmed as Fed chair

Kevin Warsh, President Trump’s nominee for chair of the Federal Reserve to replace Jerome Powell, was confirmed by the US Senate on Wednesday by a vote of 54-45. Powell’s term as chair expired at midnight on May 14, but he will stay on the Fed’s board as a governor. The timing of Warsh’s formal swearing in has not yet been made public, but it is likely to come well before the next FOMC meeting in mid-June. Stephen Miran, who was temporarily appointed to the Federal Reserve Board in September 2025, submitted his resignation to President Trump on Thursday, leaving his seat open for Warsh. Investors currently expect the Fed to remain sidelined over the next year amid persistently above-target inflation.

US inflation running hot

Consumer prices in the US rose 0.6% month over month in April while core prices rose 0.4%. On a year-over-year basis, prices rose 3.8% at the headline level and 2.8% at the core. Core services ex housing rose particularly sharply in April. Producer prices rose even more sharply last month, jumping 6% year over year.

UK PM Starmer weakened after local elections

British Prime Minister Keir Starmer’s political standing has been severely weakened in the aftermath of his Labour Party losing nearly 1,500 seats in local council elections late last week. In an additional blow, Health Secretary Wes Streeting resigned from the cabinet Thursday, saying he has lost confidence in Starmer’s leadership, though he stopped short of triggering a leadership challenge to unseat the prime minister. Later that day, Manchester Mayor Andy Burnham, considered Starmer’s most likely successor, announced that he will run for parliament after a Labour MP resigned his seat to clear the way for Burnham to return to the House of Commons, where he served from 2001 until 2017, if elected. The Labour Party’s national executive committee must approve Burnham’s candidacy, something he was denied in February when he attempted an earlier run. The BBC reported Thursday afternoon that Starmer won’t seek to block Burnham’s run this time. The pound slipped and 10-year gilt yields rose to their highest levels in nearly two decades in expectation of looser UK fiscal policy should Starmer be forced to stand down.

QUICK HITS

The Trump administration is reportedly considering suspending the 18.4 cent/gallon federal tax on gasoline to help lower prices at the pump.

Goldman Sachs forecasts that the Fed will cut rates in December and March, pushing out their prior forecast of cuts in September and December. Thanks to sustained US economic resilience, analysts at the firm lowered their 12-month recession probability by five percentage points, to 25%.

This week, the US Court of Appeals for the Federal Circuit issued an immediate administrative stay on last week’s ruling that found President Trump’s 10% global tariff unlawful. While the appeals process continues, the tariffs will remain in place.

US existing home sales rose 0.2% in April to an annual rate of 4.02 million homes. The median price rose 0.9% from a year ago to $417,700.

Driven by rising energy prices, Chinese PPI rose 2.8% year over year in April, up from 0.5% in March. CPI rose to 1.2% from 1%.

US industrial production rose 0.7% month over month in April, beating expectations.

The CME Group announced it will create a futures market for AI-driven computing power. The new contracts will allow traders, financial institutions, AI builders and cloud service providers to manage volatility and price risk associated with the compute market.

Eurozone GDP rose 0.8% year over year in Q1, in line with forecasts.

US retail sales remained solid in April, rising 0.5% at the headline level and 0.5% after stripping out volatile categories such as autos, gasoline and building materials.

On Thursday, US Central Intelligence Agency Director John Ratcliffe visited Cuba for talks with the country’s leaders, on getting the island to open its economy and political system.

EARNINGS NEWS

With about 91% 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 11.4% over the same period. Nvidia reports next Wednesday.

THE WEEK AHEAD

Monday: US NAHB housing index

Tuesday: Japan Q1 GDP; UK unemployment; Canada CPI; US pending home sales

Wednesday: UK CPI; eurozone CPI; US FOMC minutes

Thursday: Global preliminary PMIs; US housing starts

Friday: UK and Canada retail sales

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