- Stocks remain higher but off highs as hope fades ahead of the weekend for peace
- Sky News Arabia: Negotiations in Tehran have reached an agreement on nuclear issue
- Bakers Hughes total rig count 758 in the current week, Up 5 for the week
- WSJ: Critical Stage in Iran negotiations: Mediators rush to prevent military action
- New Fed Chair Warsh: Ours is a time of great consequence
- Trump: I expect Kevin Warsh to go down as one of the very best Fed Chairman.
- More Waller: Hawkish comments from the Fed Governor
- Feds Waller: Does not expect change in policy in the near term
- UMich May final consumer sentiment 44.8 vs 48.2 expected
- Reuters:Qatar send negotiating team to Tehran to help secure a end of war deal
- Fed interest rates explained at investingLive.com
- Canada retail sales for March 0.9% vs 0.6% estimate
- Canada April PPI +2.0% m/m vs +1.3% expected
- investingLive European markets wrap: A mixed mood amid cautious optimism on US-Iran talks
- ECB President Lagarde says ECB will follow a data-dependent, meeting-by-meeting approach
The week is ended with markets focused squarely on the growing tension surrounding Iran, as negotiations entered what officials described as a critical stage. Mediators including Pakistan, Qatar, and Saudi Arabia worked urgently to secure at least a temporary framework agreement aimed at preventing renewed U.S. and Israeli military action. The diplomatic effort is centered on extending the cease-fire and buying time for broader negotiations, but major divisions remain — particularly over Iran’s uranium enrichment program and how quickly Tehran must make nuclear concessions in exchange for sanctions relief and an easing of hostilities.
Reports indicated there has been only modest progress so far, with both sides still far apart. Iran is seeking sanctions relief, protection from future attacks, and the reopening of trade routes before making major nuclear concessions, while the U.S. is demanding tighter nuclear restrictions, including limits on enrichment and the surrender of near weapons-grade material, before broader relief is offered. Officials warned that if talks fail, the U.S. and Israel could consider renewed strikes, potentially targeting Iranian economic and energy infrastructure to increase pressure on Tehran. Iran responded by warning it would retaliate broadly against any new military action.
The geopolitical backdrop remains highly uncertain. Israel is reportedly concerned that President Trump could agree to a deal viewed as too soft on Iran’s nuclear and missile programs, while Prime Minister Netanyahu remains skeptical that diplomacy will succeed. Trump has signaled he prefers a negotiated solution but also warned that military action remains on the table if an agreement cannot be reached. As a result, markets continue to react sharply to every headline tied to the negotiations, with oil prices, Treasury yields, stocks, and the US dollar all seeing heightened volatility into the weekend. PS Pres. Trump will remain in Washington for the weekend and will be missing his son's (Don Jr.). wedding in the Bahamas.
The final University of Michigan consumer sentiment report for May painted a weaker picture of the US consumer than expected. The headline index fell to 44.8 from 48.2, marking a third straight monthly decline and pushing sentiment back near the historic lows from mid-2022. Higher gasoline prices tied to Strait of Hormuz supply disruptions remained a key concern, with 57% of consumers citing the rising cost of living as a financial strain. Lower-income households were hit the hardest. Most importantly for markets and the Fed, inflation expectations moved higher again. One-year expectations rose to 4.8% from 4.5%, while five-year expectations jumped to 3.9% from 3.4%, increasing concerns that inflation pressures could become more persistent. The report supports higher yields and a firmer US dollar as it lowers expectations for near-term Fed rate cuts, while also raising concerns about future consumer spending and growth.
Fed Governor Christopher Waller reinforced the hawkish tone, pushing back strongly against expectations for near-term rate cuts. Waller said he does not expect to support a policy change anytime soon and warned that inflation risks tied to higher energy prices and rising inflation expectations are becoming more concerning. He said the labor market is now largely balanced, shifting the Fed’s focus squarely toward inflation. Waller warned the Fed’s inflation miss is entering its sixth year and said he would not hesitate to support a rate hike if inflation expectations become unanchored. While not actively calling for a hike now, he argued the Fed should remove its easing bias and said discussions about rate cuts are premature given current inflation pressures. He also noted consumer spending remains resilient and there is no sign the AI-driven investment boom is slowing.
President Donald Trump formally swore in Kevin Warsh as the new Fed Chair, praising him as uniquely qualified to lead the institution while emphasizing Fed independence and the importance of sustaining strong economic growth. Trump argued that low inflation and strong growth can coexist and pointed to the stock market rally as evidence investors welcomed Warsh’s appointment.
In his remarks, Warsh struck a confident, reform-oriented tone, pledging to lead the Fed with “energy and purpose” while remaining faithful to its mission. He said the years ahead could bring strong prosperity and rising living standards, emphasizing that lower inflation and strong growth are achievable together. Warsh also signaled a willingness to modernize the Fed and learn from both past mistakes and successes.
Looking ahead, markets next week traders will focus on inflation, central banks, and geopolitical risks. The key event for the US will be Thursday’s core PCE inflation report — the Fed’s preferred inflation gauge — as Warsh begins his tenure facing elevated inflation expectations and persistent price pressures. Markets will also monitor consumer confidence, GDP revisions, housing data, and Fed speakers including Austan Goolsbee and John Williams. Globally, attention will turn to the RBNZ decision, BOJ commentary, Japan inflation data, China PMIs, and Canada GDP. Geopolitical headlines surrounding Iran remain the key wildcard, with oil, yields, stocks, and the US dollar continuing to react sharply to every new development. Thin holiday liquidity conditions early in the week could amplify volatility.
A snapshot of the markets at the end of the week is showing:
- Dow Industrial Average +0.59%
- S&P Index +0.33%
- Nasdaq index. +0.11%
For the trading week:
- Dow +2.10%
- S&P +0.83%
- Nasdaq +0.38%
In the US debt market, yields are ending the day mixed with a flatter yield curve as the markets price in a hike in 2026 that may lead to slower growth.
- 2 year 4.123%, +3.6 basis points
- 5 year 4.256%, +0.01 basis points
- 10 year 4.558%, =2.6 basis points
- 30- year 5.064%, -4.7 basis points
For the week:
- 2 year yield rose 4.4 basis points
- 5 year yield Unchanged
- 10 year yield -4.1 basis points
- 30 year yield -5.9 basis points
Looking at the USD today, it was mixed vs the major currencies. The USD versus the::
- EUR +0.10%
- JPY +0.12%
- GBP-0.08%
- CAD+0.23%
- CHF -0.245
- AUD +0.22%
- NZD +0.27%
For the week, the USD mixed as well. :
- EUR +0.15%
- JPY +0.28%
- GBP +0-.92%
- CHF -0.19%
- CAD +0.51%
- AUD +0.17%
- NZD -0.34%
In other markets:
- Crude oil is near unchanged at $96.37 and down -4.73% for the week
- Gold is down -$36 on the day and down -$34 for the day or -0.73%
- Silver is down -$1.23 on the day at $75.45 and dowjn -0.46% on the week.
This article was written by Greg Michalowski at investinglive.com.
