Nvidia's Record Earnings Propel S&P 500 to Eighth Consecutive Weekly Gain as Inflation Pressures Mount

Weekly Market Commentary | Week of May 25th, 2026

A Recap of Economic and Financial Trends from the Prior Week

By: Michael Horvath, The Quinnipiac University Global Economics Research Team

Last Week in Review

• U.S. consumer sentiment fell to a record low of 44.8 as year-ahead inflation expectations rose further, while flash PMI data showed input costs surging at the fastest pace since late 2022

• The S&P 500 rose for an eighth consecutive week, its longest winning streak since 2023, led by small-cap and value stocks as Nvidia's stronger-than-expected earnings revived AI enthusiasm and de-escalation hopes in the Middle East supported sentiment

• European markets advanced broadly on conflict de-escalation hopes, while Japan's economy expanded at an annualized rate of 2.1% in Q1 and China's April activity data disappointed, reviving stimulus concerns

Economic Recap

U.S. economic data last week pointed to continued expansion alongside intensifying inflation pressures. S&P Global's May Flash Composite PMI held steady at 51.7, with the manufacturing component rising to 55.3, its highest level in four years, while services activity softened to a two-month low of 50.9. The inflation components of the survey were notably concerning, with input costs rising at the fastest pace since late 2022 and selling price inflation reaching its highest level since August 2022, with businesses broadly attributing increases to higher energy costs. Employment fell overall, with job losses largely attributed to concerns around rising costs and worsening demand conditions. The University of Michigan's Index of Consumer Sentiment declined for the third consecutive month in May, dropping five points to a record low of 44.8. Year-ahead inflation expectations rose to 4.8% from 4.7% in April, well above the 3.4% reading in February before the start of the Middle East conflict, and long-run inflation expectations climbing to 3.9% from 3.5%. The NAHB Housing Market Index rose three points to 37 in May but remained below the neutral level of 50 for the 25th consecutive month, with NAHB Chairman Bill Owens citing higher mortgage rates, rising gas prices, and economic uncertainty related to the war in Iran as factors dampening buyer demand. Pending home sales increased 1.4% in April, down from a 1.7% rise in March, while housing starts declined 2.8% to a seasonally adjusted annual rate of 1.465 million. The average interest rate for a 30-year mortgage rose to 6.51%, up from 6.36% in the prior week and the highest level since August. Minutes from the Federal Reserve's April monetary policy meeting highlighted heightened inflation concerns among policymakers, with a majority of participants indicating that further policy firming could be appropriate if inflation remained persistently above the central bank's 2% target.

Internationally, the European Commission cut its 2026 eurozone GDP growth forecast to 0.9%, down from the 1.4% registered in 2025 and below its prior estimate of 1.2%, citing a major energy shock and a volatile geopolitical and trade environment, while raising its 2026 inflation forecast to 3.0% from 1.9%. Germany's producer price inflation hit 1.7% in April, its highest level since May 2023, driven by intermediate goods and mineral oil prices. The eurozone's trade surplus narrowed sharply to EUR 7.8 billion in March 2026, down from EUR 34.1 billion in the same month a year earlier, with shipments to the U.S. 38.8% lower on the year following the imposition of U.S. tariffs. In Japan, Q1 GDP expanded at an annualized rate of 2.1%, above the consensus forecast of 1.7% and accelerating sharply from 0.8% in the prior quarter, while core inflation slowed to 1.4% year over year in April, its lowest reading in four years and below the Bank of Japan's 2% target. In China, April industrial output rose 4.1% year over year, below March's 5.7%, while retail sales increased just 0.2% year over year, the weakest growth since late 2022.

Market Recap

Source: JPMorgan Asset Management, “Weekly Market Recap” (May 25th, 2026). (Chart © JPMorgan Asset Management. Chart used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

Major U.S. stock indexes finished the week higher, extending a winning streak to eight consecutive weeks for the S&P 500, its longest since 2023. The Dow Jones Industrial Average advanced 2.18% to a new all-time high of 50,580, while the S&P 500 gained 0.91% to 7,473 and is now up 9.69% year to date. Small-cap and value stocks outperformed large-cap and growth shares, with the Russell 2000 rising 2.75% and the Russell 1000 Value gaining 1.79% on the week, while the Russell 1000 Growth advanced a more modest 0.47% and the Nasdaq Composite edged up just 0.48%. An equal-weighted version of the S&P 500 outpaced its market cap-weighted counterpart, reflecting broadening participation. After a volatile start to the week, sentiment improved as enthusiasm around AI stocks was supported by Nvidia reporting record revenue of USD 81.6 billion, an increase of 85% year over year and 20% sequentially, with the Data Center segment reaching USD 75.2 billion, 92% higher than a year earlier. U.S. Treasuries generated positive returns through most of the week, with the 10-year yield hitting a midweek high of 4.69% before retreating to around 4.56% as of Friday afternoon after President Trump said the U.S. was in the "final stages" of talks with Iran.

Internationally, the MSCI EAFE gained 2.20% on the week and is up 8.56% year to date, while MSCI EM advanced 1.11% and is up 20.95% year to date. The pan-European STOXX Europe 600 rose 3.00% in local currency terms, with Germany's DAX climbing 3.92%, the UK's FTSE 100 advancing 2.66%, France's CAC 40 gaining 2.05%, and Italy's FTSE MIB rising 0.80%, as rising hopes of Middle East de-escalation drove broad gains across the region. Japan's Nikkei 225 rose 3.14% as technology and AI-related shares led the advance following Nvidia's strong results.

Market Themes

Nvidia's Record Results Supercharge AI Momentum and Validate Hyperscaler Spending Commitments

Nvidia reported record quarterly revenue of USD 81.6 billion, an increase of 85% year over year, with its Data Center segment generating USD 75.2 billion, 92% above year-earlier levels. The results validated the surge in hyperscaler capital spending commitments that has been a central pillar of the AI investment thesis, with analyst Christopher Rolland noting that the top five hyperscalers are now expected to nearly double capital expenditure in 2026 compared with prior Street estimates of a 62% year-over-year increase. At Nvidia's GTC conference in March, Chief Executive Jensen Huang updated the company's combined Blackwell and Rubin revenue forecast to exceed approximately USD 1 trillion through calendar 2027, up from approximately USD 500 billion across 2025 and 2026, while noting the possibility of further upside from new platforms. The strong results also broadened the AI rally beyond the Magnificent Seven, with small-cap and equal-weighted indexes outperforming market-cap-weighted benchmarks as investors increasingly view AI-driven growth as a catalyst capable of lifting a wider swath of the market. FactSet now forecasts S&P 500 earnings growth of 28.4% for Q1 2026, which would mark the highest growth rate reported by the index since Q4 2021.

Turkey's Political Shock and Indonesia's Rate Hike Highlight Emerging Market Political and Inflation Risks

While AI enthusiasm and Middle East de-escalation hopes dominated developed market sentiment, two significant developments in emerging markets underscored the differentiated risk landscape facing investors in less-liquid economies. In Turkey, a court ruling of absolute nullity effectively erased the opposition Republican People's Party congress held in November 2023, removing CHP leader Ozgur Ozel from office and reinstating former leader Kemal Kilicdaroglu as interim party head. The decision triggered a broad risk-off move across Turkish assets, with equities falling sharply and trading temporarily halted, sovereign bonds selling off, and domestic bond yields surging, while the central bank reportedly sold billions of dollars in foreign exchange reserves to defend the lira. In Indonesia, Bank Indonesia unexpectedly raised its policy rate by 50 basis points to 5.25%, its first rate increase since 2024 and the most aggressive move since 2022, framing the decision as a preemptive step to stabilize the rupiah and anchor inflation expectations after the currency fell to record lows. Together, these developments illustrate the degree to which geopolitical fragmentation and energy-driven inflation are producing sharply divergent central bank policy responses and asset price outcomes across the emerging market universe.

Chart of the Week

Source: Institute for Supply Management (ISM), Bloomberg, Macrobond, Apollo Chief Economist Torsten Slok, "Semiconductor Stock Prices Are a Leading Indicator of Manufacturing Activity," May 2026. (Chart © Apollo Chief Economist. Used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

The chart plots the ISM Manufacturing PMI Index against the Philadelphia Stock Exchange Semiconductor Index on a year-over-year basis from 1998 through 2026. The two series have historically tracked each other closely, with semiconductor stock prices tending to lead broader manufacturing activity by approximately 6 to 12 months, reflecting the fact that manufacturers order chips well in advance of ramping production given long semiconductor lead times. The chart shows that the Philadelphia Semiconductor Index has recently surged to approximately 160% year over year, its highest level in the data series, consistent with the AI-driven demand for semiconductors that has dominated market narratives. Historically, such sharp advances in semiconductor stock prices have preceded a meaningful acceleration in ISM Manufacturing PMI readings, suggesting that current chip demand tied to AI infrastructure buildout may be an early signal of a broader pickup in manufacturing activity. The relationship provides an important forward-looking lens for assessing the macro implications of the ongoing AI capital expenditure cycle.

Market Outlook

U.S. markets will be closed Monday in observance of Memorial Day. The primary focus for the shortened week ahead is the April core PCE price index and the second preliminary estimate of Q1 2026 GDP, both due Thursday, which will provide the Federal Reserve's preferred inflation gauge and a revised read on first-quarter growth. New Fed Chair Kevin Warsh, whose Senate confirmation was approved last week, faces the challenge of navigating a policy environment in which a majority of April FOMC participants indicated further tightening could be appropriate if inflation remains persistently above the 2% target. Consumer confidence data on Tuesday will offer a further read on household sentiment following the University of Michigan's record-low reading. On the earnings front, Salesforce, Dell Technologies, and Costco Wholesale report this week, with investor focus on whether corporate guidance reflects growing caution about energy cost pass-through and consumer demand durability.

Calendar Events

Economic Data:

• May 25 (Mon): U.S. markets closed for Memorial Day

• May 26 (Tue): FHFA Home Price Index (Mar); Consumer Confidence (May)

• May 27 (Wed): ADP Employment Change

• May 28 (Thu): GDP second preliminary (Q1); Core PCE Deflator (Apr); Personal Income and Consumption (Apr); Initial Claims (May 23); Durable Orders preliminary (Apr); New Home Sales (Apr)

  
  

Major Corporate Earnings:

• May 25 (Tue): AutoZone Inc. (Q3 2026)

• May 27 (Wed): Salesforce Inc. (Q1 2027); HP Inc. (Q2 2026)

• May 28 (Thu): Costco Wholesale Corporation (Q3 2026); Dell Technologies Inc. (Q1 2027); Dollar Tree Inc. (Q1 2026); Autodesk Inc. (Q1 2027)

Sources

J.P. Morgan Asset Management. "Weekly Market Recap PDF." J.P. Morgan Asset Management. https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf

J.P. Morgan Asset Management. "Economic Update." J.P. Morgan Asset Management. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/economic-update/

T. Rowe Price. "Global Markets Weekly Update." T. Rowe Price Insights. https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html

BlackRock Investment Institute. "Weekly Commentary Archives." BlackRock. https://www.blackrock.com/corporate/insights/blackrock-investment-institute/archives

Apollo. "The Daily Spark." Apollo. https://www.apollo.com/wealth/the-daily-spark

MarketWatch. "Economic Calendar." MarketWatch. https://www.marketwatch.com/economy-politics/calendar

Yahoo Finance. "Earnings Calendar." Yahoo Finance. https://finance.yahoo.com/calendar/earnings/