Equity markets spent last week doing a convincing impression of a ping-pong match, though by Friday’s close, they managed to finish essentially flat—thanks in large part to Apple, Microsoft, and NVIDIA carrying the baton across the finish line. Through the week’s back-and-forth, Sowell’s trend-following gauges remained steady, disciplined, and fully invested, supported by underlying fundamentals that continue to show more resilience than the daily headlines might suggest.
The Art of the Squeal: Markets Buckle as Inflation Resurfaces
Let's set the scene. On Thursday evening, the Dow crossed 50,000 for the first time since February, the S&P 500 pushed above 7,500 — a first in its storied history — and the Nasdaq touched a new all-time intraday high of 26,707. Markets were practically printing "Mission Accomplished" banners. Then Friday happened. You know how you feel after a perfect dinner party when you discover you left the oven on? That was Wall Street on May 15th.
By the closing bell, the S&P 500 shed 1.22% to close at 7,408.50, surrendering its historic 7,500 perch in a single session. The Nasdaq Composite slid 1.53% to 26,225.14. For the week, all indices barely treaded water, each finishing essentially flat to marginally lower despite the record-setting fireworks midweek. The math is humbling: you can set all-time highs on Thursday and still end the week lower. That's not a paradox — that's Friday.
The Beijing Summit: Lots of Handshakes, One Airplane Order
For most of the week, all eyes were trained on Beijing, where President Trump arrived flanked by a who 's-who of corporate America — Tim Cook, Elon Musk, Nvidia's Jensen Huang, and 13 other top executives — for a two-day summit with President Xi Jinping. Wall Street watched with the breathless anticipation of a fan watching a penalty shootout. The market needed a deal. A real one. With numbers. And ink.
The headline deliverable from the summit was China's commitment to purchase 200 Boeing commercial jets — a number that, on its face, sounds impressive. Markets disagreed. Boeing shares fell 4.7% on Friday after the 200-aircraft figure underwhelmed investors who had been hoping for something closer to 300 to 400 planes. The market's reaction to Boeing was a perfect microcosm of the entire summit: big numbers, bigger expectations, disappointing delta.
To be fair to the summit, the two leaders did agree to establish a "Board of Trade" and a "Board of Investment," under what China called a "reciprocal tariff reduction framework." Xi also told Trump that China would not supply military equipment to Iran — something Trump called "a big statement." In the geopolitical scorebook, that's meaningful. In the equity market scorebook, that's a single on a day the market was expecting a home run. Trump then invited Xi to the White House in September. Lucky us — we get to do this all over again.
Inflation: The Guest Nobody Invited Who Refuses to Leave
If the summit was the headline act of the week, inflation data was the opening set that put everyone on edge. Tuesday's CPI was warm but digestible. Wednesday's PPI was a blowtorch. Taking it together, they confirmed what oil prices had been whispering for weeks: the Strait of Hormuz closure has gone from a geopolitical story to an inflation story, and it's now threatening to become a monetary policy story. The story tells is a study in contradictions. The inflation readings were uncomfortably hot — especially on the producer side, where headline PPI at +1.4% for the month was nearly three times the Dow Jones consensus estimate, the largest monthly gain since March 2022, and annual PPI running at +6.0%. Core PPI at +5.2% annualized. These are not transitory footnotes; they are structural warnings. The culprit, in large part, is $100-plus oil — West Texas Intermediate rose another 9% this week alone as the Strait of Hormuz remains closed. Energy is the circulatory system of the global economy. When it gets expensive, the infection spreads — and the PPI is showing the fever.
Yet paradoxically, the non-inflation data this week was genuinely encouraging. Industrial Production surged 0.7% against a 0.3% estimate. The Empire State Manufacturing Index printed at 19.6 versus a 10.0 forecast. Control-group retail sales beat. Capacity utilization topped estimates. Business inventories saw their largest gain since June 2022. The consumer is spending. The manufacturing environment is holding. Companies, armed with record profit margins and still-healthy employment levels, are absorbing the cost shocks rather than slashing headcounts. The economy, it seems, didn't get the memo that it was supposed to be struggling. Which is great news for Main Street and complicated news for anyone hoping for rate relief from the Fed.
The Bond Market: Where the Real Story Was Told
If equities were the drama, Treasuries were the reckoning. The 10-year Treasury yield climbed from 4.35% at Monday's close to 4.59% by early Friday — a move of 24 basis points in five sessions, its highest level since May 2025. The 30-year yield cracked 5.12%, a level last seen in 2007. The 2-year note crossed above 4.0%. All three key benchmarks crossing their respective psychological levels in the same week is not a coincidence — it's a coordinated signal from the bond market that rate cuts in 2026 are not just unlikely; they are increasingly fantasy. Bond prices move inversely to yields, meaning bondholders absorbed meaningful losses this week as inflation data lit the fuse.
The rise in yields wasn't isolated to the United States. Japanese 10-year government bonds pushed to 2.70%, a level last seen in May 1997. German Bunds hit 3.14%, their highest since 2011. UK gilts reached 5.15%, last seen in 2008. The global bond market is not being subtle. The inflation problem isn't a U.S.-only story; the Strait of Hormuz closure is a global supply shock, and rate relief isn't on the near-term menu anywhere.
New Fed Chair, Same Impossible Job Description
Into this environment stepped Kevin Warsh, confirmed by the Senate on Wednesday in a 54-45 vote — the closest and most partisan confirmation in modern Fed history — as the 17th Chairman of the Federal Reserve, succeeding Jerome Powell. Warsh is 56, a former Fed governor, a Stanford lecturer, and the man President Trump once joked he'd sue if rates aren't cut. Powell, for his part, will remain as a temporary seat-warmer until Warsh is formally sworn in — an arrangement so unusual it last occurred nearly 80 years ago. The image of Powell retaining a vote while the new chairman is getting his bearings is either a reassuring display of institutional stability or a beautifully awkward dinner party, depending on your disposition.
The central question that markets will eventually have to price is whether Warsh brings continuity or regime change. He takes office with CPI at 3.8%, PPI running at 6% annualized, and a rate-setting committee already signaling that rate hikes are back on the table. The rate cut Trump desperately wants — and that Warsh's White House allies are banking on — is looking far and few between. Warsh's first FOMC meeting is June 16-17. Don't expect fireworks. Do expect very careful words.
The Philadelphia SOX: The Party That Got Rained On Mid-Dance
If you want to understand what actually happened in technology this week, stop looking at the Nasdaq headline number and look at the Philadelphia Semiconductor Index — the SOX. It tells the unfiltered truth. The SOX closed Friday at 11,588, down 4.02% on the session alone, capping a week that saw the index swing from near its 52-week high of 12,141 to a bruising Friday close. Let that sink in: the SOX had surged nearly 250% from its April trough and was up more than 71% year-to-date coming into this week. It was not a question of whether a pullback was coming. The only question was what would light the match. Hot CPI on Tuesday obliged.
Chip Stock
Approx. Week Move
Worst Session
YTD Gain (Pre-Selloff)
Qualcomm (QCOM)
▼ ~17%
▼ 11% (Tue) + 6% (Thu)
+60%+
Intel (INTC)
▼ ~12%
▼ 7–8% (Tue), 6%+ (Fri)
+214%
AMD (AMD)
▼ ~6%
▼ 5.7% (Fri)
+110%
Micron (MU)
▼ ~6.6%
▼ 6.6% (Fri)
+179%
Nvidia (NVDA)
▼ ~flat/neg
▼ 4.4% (Fri)
+~15%
SOX Index
▼ ~4% Fri alone
▼ 6.8% intraday (Tue)
+71% YTD
All eyes now pivot to Nvidia's earnings after the bell on Wednesday, May 20th.
The Bottom Line: A Week of Highs, Headlines, and Hard Realities
Strip away the noise and this week told a coherent — and somewhat contradictory — story. Corporate America is printing record earnings. The consumer is spending. Manufacturing is beating estimates. The economy, by nearly every measure except inflation, looks healthy. And yet: inflation is running hot, the bond market is pricing in rate hikes, oil is approaching $110, the Beijing summit produced more ceremony than substance, a Putin-Xi meeting looms on the calendar, and the Fed just swapped chairs mid-storm.
Record profit margins and 25% EPS growth are not narratives to dismiss lightly. But the easy money from the AI rerating and trade-truce euphoria is largely behind us. The next leg — if it comes — will need to be earned through fundamentals, not Fed hopes or summit handshakes. Watch the week ahead closely: Nvidia on May 20th, any signals from Chairman Warsh, oil prices, and whether the Putin-Xi meeting produces anything that changes the Iran-conflict calculus.
“China is committed to a steady, sound and sustainable development of China-U.S. relations. I have agreed with President Trump on a new vision of building a constructive China-U.S. relationship of strategic stability. This will provide strategic guidance for China-U.S. relations over the next three years and beyond, and will be well received by the people of both countries and the international community. “Constructive strategic stability” means positive stability with cooperation as the mainstay, healthy stability with competition within proper limits, constant stability with manageable differences, and lasting stability with expectable peace. Building a constructive China-U.S. relationship of strategic stability is not a slogan. It means actions in the same direction.”
– China President Xi Jinping, May 14th, 2026
Key Takeaways from Jay Powell’s Final FOMC as Fed Chair
Author: Phil Wool
“Economists are basically unanimous that Fed independence is critically important. And to see why, just look at the countries where they don’t have Fed independence. Inflation is higher, unemployment is higher, growth is worse.”
—Austan Goolsbee, Chicago Fed President, speaking to CNBC in April 2025
Sometimes there’s uncertainty about what the Fed will do at an FOMC meeting. That definitely wasn’t the case when policymakers convened late last month, with Fed funds futures pricing in virtually zero probability of anything but a continuation of the central bank’s hold on US interest rates. Instead, what kept us all glued to the TV during the Fed’s post-meeting presser was a knowledge that it would be Jay Powell’s last Q&A as Fed chair—his term ended on Friday, May 15, 2026—and perhaps a question as to how he would choose to end things: Would he ride off into the proverbial sunset after eight years at the helm, or stick around on the Board of Governors, a role that could keep him at the bank into 2028?
Despite the Fed predictably standing pat on rates, those who opted to tune in for Powell’s swan song enjoyed plenty of drama, as the outgoing chair did end up exercising his right to hang around as a voting member of the Board of Governors—something that hasn’t happened since 1948. During the press conference, Powell argued that “things that have happened, really in the last three months, have left [him] no choice” but to remain on the boar
d and, one presumes, fight to defend the central bank’s independence against challenges from President Trump’s White House.
Chief among those threats, according to critics of the administration, was a criminal probe by the Justice Department into Powell’s handling of renovations at the Federal Reserve building. That investigation was halted in late April—allowing a Senate Banking Committee vote to confirm the next Fed chair, Kevin Warsh, to go through in the nick of time—though without exoneration of the Fed chair and with a suggestion that the probe might be resumed at any time. Such conditions didn’t lend enough “transparency and finality,” in Powell’s words, to give him sufficient confidence the Fed would continue to operate free from political coercion.
Powell’s choice to postpone his retirement would have been big enough news for pundits to digest, though it wasn’t the only surprise stemming from late April’s meeting. While the policy vote’s outcome was entirely expected, the breakdown of yeas and nays yielded another interesting conclusion: there were an extraordinary four dissents included in the tally, three of which came in against expressing any sort of easing bias in the FOMC’s post-meeting statement; the fourth was Stephen Miran’s expected preference for a quarter-point cut versus a hold on rates. That may not seem too contentious, but it turns out to be the most dissenting votes against Fed action (see chart below) since way back in October 1992, when Committee members were debating a continuation of easing amidst a weak economic recovery.
In the context of Powell’s choice to remain a voting member of the board, growing division within the FOMC is particularly salient: It effectively prevents Warsh and Miran from both casting a pro-Trump vote on future rate decisions, most likely forcing the temporarily appointed Miran to resign in order to vacate a seat at the table for the new chair. Although Powell has been adamant that he has no intention of becoming a “shadow chair” at the Fed (“I'm not looking to be a high-profile dissident, or anything like that,” he said during his farewell press conference), it’s hard to imagine the dynamic not being awkward with strong voices of the past and present inevitably influencing two sides of an increasingly tenuous consensus.
On the other hand, as we’ve mentioned before, there’s something very natural and actually quite healthy about debate intensifying as rates narrow down to a probable “neutral” range. That’s especially true amidst the kind of pronounced uncertainty in the data that has accompanied last year’s tariff threats and the massive energy shock from this year’s conflict in the Middle East. Indeed, it seems likely to us this challenging setup for inflation is more to blame for traders’ increased pessimism over further easing, and that—uncomfortable as the “old-and-new-chairs” dynamic might be—Powell will ultimately seek to avoid the limelight and quite possibly find an off-ramp from the Board as soon as the Fed’s inspector general, currently auditing Powell’s building project, absolves him of any wrongdoing.
Until then, just make sure you’ve got the popcorn ready for June’s FOMC, where Kevin Warsh is almost set to make what will, one imagines, be an appropriately dramatic debut!
Disclosure: This material is for informational purposes only and should not be considered investment advice. An investor should consult with their financial professional before making any investment decisions. The opinions contained herein are subject to change without notice and do not necessarily reflect the opinions of Rayliant Investment Research. Indices cannot be invested in directly and are unmanaged.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
WEEK AHEAD
May 18-22, 2026
The Art of the Squeal: Markets Buckle as Inflation Resurfaces
The Beijing Summit: Lots of Handshakes, One Airplane Order
Inflation: The Guest Nobody Invited Who Refuses to Leave
The Bond Market: Where the Real Story Was Told
New Fed Chair, Same Impossible Job Description
The Philadelphia SOX: The Party That Got Rained On Mid-Dance
All eyes now pivot to Nvidia's earnings after the bell on Wednesday, May 20th.
The Bottom Line: A Week of Highs, Headlines, and Hard Realities
Key Takeaways from Jay Powell’s Final FOMC as Fed Chair
Author: Phil Wool
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.