The week ending 22 May 2026 was driven by two competing forces pulling markets in opposite directions. NVIDIA’s record Q1 results and AI earnings momentum pushed equities higher, with the S&P 500 extending its winning streak to eight consecutive weeks, its longest since 2023. Simultaneously, the April Fed minutes revealed that the majority of members open to rate hikes if inflation remains above 2%. On the geopolitical front, Trump cancelled a planned military strike on Iran on Monday after Gulf allies intervened, driving a sharp equity rally and a decline in WTI oil. The dominant cross-asset tension this week: equities are trading on AI earnings; bonds are trading on inflation and fiscal risk. The VIX closed at 16.70, down from 18.40 the previous week.
Key Themes
- AI earnings anchor the equity rally, but breadth is narrow. NVIDIA reported Q1 FY2027 revenue of $81.6bn (+85% YoY), with data centre revenue up 92%. Arm Holdings surged nearly 50% WoW on agentic AI CPU demand. The Mag 7 posted Q1 EPS growth of 63% vs 17% for the other 493 S&P 500 companies. Despite the strength, NASDAQ underperformed the Dow, and NVIDIA’s stock fell ~6% post-earnings, a recurring pattern suggesting the cycle is already well priced.
- Bond markets repricing from cuts to hikes. April Fed minutes (8-4 vote to hold) showed the most divided FOMC since 1992, with a majority willing to hike if inflation stays above 2%. Market pricing has shifted from approximately 8bps of cuts priced through year-end to near-zero, with hike probability at roughly 39% by Q1 2027. The 10-year Treasury ended the week at 4.56%, masking a mid-week peak of 4.69%.
- Iran: strike called off Monday, “final stages” Wednesday. Trump announced the cancellation of a planned military strike on Iran on Monday 18 May, following direct appeals from the Qatari Emir, Saudi Crown Prince MBS, and the UAE President. This was the week’s single largest market-moving event on Monday. Mid-week, Trump said talks are in “final stages,” driving the week’s sharpest oil decline ((8.4%) WoW). Key sticking points remain: Iran’s enriched uranium stockpile and Hormuz toll demands.
- SpaceX filed its S-1 on 20 May, targeting a $75bn capital raise at a $1.75tn valuation on Nasdaq under ticker SPCX. If completed, this would be the largest IPO in history by more than 2x. The filing revealed Starlink’s 63% EBITDA margin as the cash engine, and xAI’s $6.35bn operating loss in 2025 as the primary drag.
