U.S. equity markets begin the week hovering near all-time highs, but Friday's retreat—driven by a surge in oil prices and a jump in bond yields—has injected a note of caution. The S&P 500 fell 1.2% on Friday to close at 7,408.50, though it eked out a 0.1% gain for the week. The Dow Jones Industrial Average slipped 0.2% over the week, while the Nasdaq Composite edged down 0.1%.
The market is caught between two powerful forces. On one side, optimism around artificial intelligence continues to lift select stocks, particularly Nvidia and its peers. On the other, the economy's resilience is pushing up oil prices and long-term interest rates, raising concerns about inflation and the Federal Reserve's next move. Friday's selloff was triggered by the 10-year Treasury yield climbing to 4.597% and the 30-year bond reaching 5.122%, according to Reuters.
Nvidia Earnings in Focus
All eyes will be on Nvidia (NVDA) when it reports fiscal first-quarter results on Wednesday after the close. Analysts are looking beyond the headline numbers to gauge whether cloud giants are still ramping up spending on Nvidia-powered AI data centers. Visible Alpha consensus from S&P Global Market Intelligence forecasts revenue of $78.5 billion, with $72.8 billion attributed to data center sales. Investors will also seek updates on the adoption of Nvidia's newer AI platforms, Blackwell and Rubin.
The broader semiconductor sector is under pressure. Shares of Advanced Micro Devices (AMD) fell 5.7% on Friday, and Intel (INTC) lost 6.2%, dragging the Philadelphia Semiconductor Index down 4%. The risk is that rising interest rates could prompt a rapid rotation out of high-growth AI stocks. “The issue is whether Nvidia can still defend its leadership position,” said Yung-Yu Ma, chief investment strategist at PNC Financial Services Group.
Retail Earnings Test Consumer Strength
This week also brings a wave of retail earnings that will provide a read on consumer health. Walmart (WMT) reports fiscal first-quarter results before the bell on Thursday, followed by a conference call with CEO John Furner and CFO John David Rainey. Home Depot (HD), Target (TGT), and TJX Companies (TJX) are also scheduled to report. These updates will shed light on how rising gasoline and food costs are affecting shopper behavior.
Allen Bond, portfolio manager at Jensen Investment Management, noted that AI enthusiasm and higher energy prices are driving markets on “almost parallel tracks.” Patrick Ryan, chief investment strategist at Madison Investments, warned that a “smaller set of names” is leading index returns, suggesting the rally may be less broad than it appears.
Oil Prices and the Fed
Oil remains a wild card. Brent crude settled at $109.26 a barrel on Friday, while U.S. West Texas Intermediate closed at $105.42. Tensions between the U.S. and Iran have dashed hopes for a quick reopening of the Strait of Hormuz, a critical chokepoint for oil and LNG shipments. Vandana Hari of Vanda Insights said traders are shifting back to expectations of “deadlock and a blockaded Strait of Hormuz.”
Jack Ablin, chief market strategist at Cresset Capital, warned that a prolonged closure could usher in a “brand new inflation regime.” Peter Tuz of Chase Investment Counsel added that persistent inflation “will drive the market down if it continues.”
The Federal Reserve will release minutes from its April 28-29 FOMC meeting on Wednesday at 2 p.m. ET. Investors will scrutinize the document for clues on how policymakers are balancing rising inflation against risks to growth and employment. Cash trading resumes Monday, with regular sessions on the NYSE and Nasdaq from 9:30 a.m. to 4 p.m. ET. The next full market holiday is Memorial Day on May 25.
