This week on 7 Market Movers, Gary covers: 

• The strong market momentum, led by tech, AI, and semiconductors. 
• Why market leadership is becoming increasingly narrow. 
• What oil prices, Iran, and the Strait of Hormuz mean for inflation. 
• How recent GDP, inflation, and jobs data could shape Fed policy. 
• The potential SpaceX IPO and what it could signal for mega-cap growth demand. 

Watch the full video:

TRANSCRIPT: 

Hello. Welcome to this edition of Weekly Market Movers. My name is Gary Quinzel with Wealth Enhancement. This week, we’re going to focus on three key areas.

We’re going to talk about what happened in the markets last week, including what drove performance. Next, we’re going to touch upon some of the latest economic data and how that impacts inflation, interest rates, and Fed policy. Last, we’re going to talk about what’s coming next, including the May jobs report, as well as the much-hyped SpaceX IPO. So let’s take a look at what happened in the markets last week.

We saw yet another strong week overall for most equity markets. Leading the way was the Nasdaq 100, up around 2.9%. Next, S&P 500 gained 1.4%, and even the Russell 2000 Small Cap Index did well at 1.75%. International markets were a bit mixed.

We saw the emerging market index climb around 2.4%, but the developed EAFE Index was slightly down -0.4%. Some of that strength in the EM side was certainly driven by dollar softness. Now, bonds even joined the party to some extent. The U.S. aggregate bond index gained around 1.1%.

Some of that was due to a Treasury rally, which happened despite some hawkish Fed commentary suggesting that markets may be pricing in a longer pause rather than an imminent rate hike. Across the board, commodities were mostly down, mostly driven by WTI crude, which fell as much as 10% or almost 10% last week, and even gold was slightly lower. But let’s double-click on the S&P 500 because it just experienced its ninth consecutive weekly gain, which is its longest winning streak since 2023. Now what is driving that?

Well, the dominant macro theme is the growing optimism around the U.S. and Iran, the continued ceasefire, and that we work towards a resolution of the three-month conflict. So there’s certainly a positive market impact that’s coming from that, and why does that matter? Well, a reopening of the Strait of Hormuz would certainly relieve pressure on energy prices.

Oil falling is certainly good for consumers and inflation, but it does, however, weigh on some of those energy stocks, which remain up year to date, but they’re certainly under pressure as of late. But I think the real story is not about what’s happening in Iran; it’s really about the continued strength of the AI trade and the growth behind that. Technology and AI remain the most powerful leadership names in the market, and a big part of that has to do with semiconductors, which have been a major story. If you take a look at the Philadelphia Semiconductor Index, it rose around 5.1% last week alone.

Dell surged almost 33% due to a very strong earnings outlook. And then take a look at some of the memory chip makers. Micron has roughly tripled this year. SK Hynix is up around 260%, and Samsung is up around 165%.

All three of those now have market caps above $1 trillion. And what does that mean? Well, concentration has become quite notable. If we take a look at the S&P 500’s 11% gain this year, 80% of that gain has come from 10 technology stocks, and 7 of those 10 are semiconductor stocks, with Nvidia and Micron being the largest two.

Now Micron is a really powerful example of how big this AI earnings story has become. Their earnings projections are expected to go from $8.5 billion in 2025 to $67 billion this year, 2026, and then up to a potentially $120 billion in 2027, all being driven by demand for AI servers, data centers, and high-bandwidth memory. And of course, hyperscaler spending continues to be quite extraordinary. If you take a look at the big spenders, the Amazons, Metas, Alphabets, and Microsofts of the world, they’re projected to spend upwards of $725 billion in CapEx alone in 2026.

So there’s certainly some real strength underlying the growth there, but leadership continues to be quite narrow and expectations are very aggressive. And so the big question for the market, of course, is how expensive is too expensive? If you go back and look at that semiconductor index, it’s trading around 71 times profits. That’s a little lofty, but as long as the market continues growing at this pace, it seems to be justified.

But the question remains, are expectations too high? Let’s shift gears and talk a little bit about economic data and Fed policy implications. First, let’s take a look at Q1 GDP, which was revised lower last week, down from 2% down to 1.6%. So it missed a little bit.

It tells us that growth is in fact decelerating, but it’s still positive. But the market more or less shrugged this off because it really is old news. We’ve essentially priced this in at this point, and it’s not the driving factor which is going to influence the Fed’s next move. What is more important is core PCE inflation, which is the Fed’s preferred inflation measure.

It came in around 3.3% year over year, which is in line or was in line with consensus, but it is higher than the previous month at 3.2%. So why does that matter? Well, it tells us that inflation could be reaccelerating, and it could be rising above the level that the Fed is comfortable with. Now Fed speak has been mixed.

Some Fed speakers have suggested the possibility of rate hikes, and others have pushed back. What it tells us overall is that the Fed is probably not ready to cut, but the market has moved from pricing several cuts earlier this year to potentially pricing no cuts or even one hike at some point in the distant future, although we do not consider that our base case right now. What we are paying attention to is the labor market. We did see that initial claims came in around 215,000, which was the highest since mid-April, slightly above consensus.

So overall, the labor market is still pretty healthy. That number, although it’s slightly higher, is very historically low. So we do view the labor market as overall stable. However, it’s not invincible.

Consumer confidence also slightly beat last week, suggesting that consumers are certainly feeling better about the state of the market and the economy. Let’s wrap up by talking about what comes next. So we talked about the jobs market. We do have an important jobs release coming this Friday with a non-farm payrolls report.

Consensus estimates are for 89,000. That sounds about reasonable, and for steady unemployment around 4.3%. The Fed is going to pay very close attention to this as they’re balancing those two competing risks of inflation and growth, and a strong jobs report would reinforce that hawkish Fed narrative, while a weak jobs report could reignite rate cut expectations. So the bottom line is the payroll number, as it always does, certainly matters, but we’re also going to be paying very close attention to the wages number to suggest to any indication that high wages might trickle into more inflation.

Let’s wrap up, just touch upon the SpaceX IPO because it is projected to be the largest IPO in history by long shot, more than double the last one, targeting up to $75 billion in proceeds with a potential valuation of $1.8 trillion, and so why does that matter? It could become a very major test of appetite for mega-cap growth and AI exposure overall, and SpaceX is a quite interesting company.

As we know, it’s evolved from not just a rocket launch company to a much broader space and AI platform. Of course, the XAI acquisition has caused some investors to be a little concerned about the cash bleed associated with that.

However, the Starlink satellite component is a very major cash flow generator. So there’s certainly some positive attributes there, and it’ll be quite fascinating to see how the IPO gets allocated because Elon Musk is projecting or potentially going to look to allocate as much as 30% to retail investors, which is quite a notable shift relative to historical IPOs, and a real test for the market.

It’s actually going to change the way that many index providers and ETF providers actually have to accommodate for an IPO of this size that will be broadly available to the mass markets.

So a lot happening right now, a lot moving to markets. That’s all for this week. Tune in next week for the weekly market movers.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor’s specific circumstances. Investing involves risk, including possible loss of principal.
 

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