Final Week of May: Three Variables Test US Stocks’ Eight-Week Winning Streak

Fueled by robust corporate earnings and the AI boom, US equities enter the final week of May with the S&P 500 having notched eight consecutive weekly gains—matching its longest winning run since late 2023. Yet investors face a volatile mix of shifting geopolitics, sticky inflation data and an unclear policy path ahead.

Iran Negotiations: Optimism Fades After “Substantial Progress” Claim

Last Saturday, Trump said on social media that a peace memorandum was “substantially completed,” including a 60-day truce extension, the reopening of the Strait of Hormuz, and the removal of US blockades on Iranian ports. The news briefly lifted hopes of a “peace dividend” and pushed oil prices lower.

The optimism only lasted less than 24 hours. On Sunday, Trump publicly urged US negotiators: “Don’t rush into a deal,” adding that both sides must “take our time and get it right, no mistakes allowed.” Iranian officials disputed the “done deal” narrative, with the Foreign Ministry stating that Tehran is pursuing a framework agreement, with details to be discussed over the next 30–60 days.

For traders, this “hope-disappointment” whipsaw equals volatility. Anwar Gargash, diplomatic adviser to the UAE President, puts the odds of a US-Iran deal at 50%—making oil the most sensitive trading variable this week. The Strait of Hormuz carries roughly 20% of global oil supply, and uncertainty there will keep energy prices elevated—and oil remains the key driver in today’s inflation narrative.

PCE Preview: 4% in Sight, Rate-Hike Expectations Surge

The market consensus forecasts the April PCE price index rising 3.9% YoY, a jump of more than one percentage point from February and the largest two-month increase since late 2021. Core PCE (ex-food/energy) is seen accelerating to 3.3%—the fastest pace since late 2023.

April CPI and PPI already topped expectations, with inflation broadening out across sectors. Rising food costs, higher airfares, and pricier PCs due to tight memory-chip supply show inflation is no longer just an energy story.

Fed policy pricing has shifted dramatically. The probability of a 2026 rate hike has jumped from 0% on May 1 to about 58%. A Bloomberg survey shows economists split 50/50 on whether rates will be cut by year-end—versus a majority calling for an October cut in the prior poll.

Luke Tilley, Chief Economist at Wilmington Trust, noted: “It’s déjà vu all over again. The Fed and markets are worried about soaring energy prices driving inflation, just like last year we worried about tariffs driving inflation.”

US Stocks: Earnings Support Fades, Macro Pressures Build

The S&P 500’s eight-week rally rests on strong Q1 earnings: 84% of companies beat estimates, with profit growth near 28%. But earnings season is largely over.

Anthony Saglimbene, Chief Market Strategist at Ameriprise, pointed out:

“Strong earnings allowed investors to ignore headwinds like Treasury yields, oil prices, and Middle East tensions. But now earnings season is basically behind us, and the macro backdrop is taking center stage.”

For CFD traders, three focal points emerge this week:

l Oil prices: Any Iran deal progress moves energy costs directly, feeding into inflation expectations and rate pricing. The 50/50 deal odds mean amplified two-way volatility.

l PCE data: A print at or above 4% will lift rate-hike bets further, hitting rate-sensitive small-caps and growth stocks hardest.

l Market internals: Eight weeks of gains have built heavy profit-taking positions. Any negative macro news could trigger a technical pullback.

Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors, warned:

“Rising inflation concerns are pressuring the bond market, and if that persists, it could put a realistic ceiling on how much further stocks can rally.”

This week’s trade is not about bull or bear—it’s about managing volatility amid uncertainty. The interplay of oil, inflation, and rates will decide whether the eight-week rally extends or sets up the next correction.