Sunday, May 17

The dominant story over the last session was renewed upward pressure on inflation expectations pushing Treasury yields and the dollar higher, even as major U.S. equity benchmarks hovered just off record levels. The S&P 500, which had set a fresh high earlier in the week, slipped as investors faded parts of the AI and megacap tech trade that had driven the latest leg of the rally, while the Nasdaq Composite also eased from peaks despite still-elevated enthusiasm around AI hardware and infrastructure names. The Dow Jones Industrial Average held above the 50,000 mark it reclaimed earlier, underscoring how flows have broadened beyond pure growth into cyclicals and cash-generative large caps.

Rates markets continued to reprice a shallower and later Fed easing path. The 10-year U.S. Treasury yield, which had already climbed toward 4.4%–4.6% on the back of higher energy prices and upside inflation surprises, remained near its highest levels in more than a year as traders leaned into the “higher for longer” narrative. That backdrop kept the U.S. dollar bid against major counterparts, in line with the recent pattern of stronger U.S. data and a less-dovish rate profile supporting USD versus EUR, JPY and EM FX. Higher real yields and policy uncertainty limited gold’s appeal despite geopolitical tension, while oil held around the low-$100s per barrel as markets weighed Strait of Hormuz supply risks against softer demand signals.

Internationally, Asian and European equities softened as the earlier boost from the Trump–Xi summit faded and investors focused instead on the implications of firmer Chinese producer prices and services activity for global inflation transmission. The next focal point is the upcoming U.S. inflation and labor market data cluster, which matters because any further upside surprise would likely cement expectations that the Fed stays on hold through year-end, reinforcing the current combination of elevated yields, a strong dollar and more selective risk appetite across equities and credit.