Fixed Income & Equities Markets Week in Review

Despite intermittent volatility, U.S. equities were on track for another weekly gain by Friday morning. Early-week pressure stemmed from volatile U.S.-Iran conflict updates, rising Treasury yields, and still-elevated oil prices, all of which challenged risk appetite. As the week progressed, however, a more constructive tone around U.S.-Iran negotiations, combined with a pullback in both yields and crude, improved market sentiment. Major U.S. indices were positioned to end the week higher, with the S&P 500 on pace for its eighth straight weekly advance.  

Geopolitics remained a headline risk to monitor as peace negotiations between the U.S. and Iran remained slow and incomplete. As the week progressed, headlines improved modestly and provided periodic boosts to market sentiment. President Trump told reporters negotiations were in the “final stages,” and Secretary of State Marco Rubio cited “slight progress” in negotiations by Friday morning. The ceasefire holding remains the biggest positive at this juncture, and a small improvement in commercial traffic through the Strait of Hormuz has also been a plus. Control of the Strait and Iran’s enriched uranium remain key hurdles to a peace deal and suggest the path to a durable resolution is still uncertain. Equities seemed to have priced in a resolution, which leaves room for market volatility if we do indeed see a re-escalation in tensions. 

Bond yields and oil prices were another key focus this week. The 10-year U.S. Treasury yield briefly reached 4.67%, its highest level since early 2025, while West Texas Intermediate crude traded above $100 per barrel before both eased later in the week. Higher bond yields can weigh on equity valuations, particularly within growth-oriented sectors, while higher oil prices spur inflation concerns and can pressure spending. That combination weighed on sentiment early in the week, particularly in growth names, with the S&P 500 Growth Index down 1.65% through Tuesday’s close. Equities received some late-week relief as the 10-year yield and WTI moved off their earlier-week highs. 

Earnings growth stands as a key driver behind the move higher in U.S. equities in recent weeks. First-quarter results have continued to support the bullish case for U.S. equities. Nvidia (NVDA) reported quarterly results Wednesday afternoon, providing investors with an important update on expectations for AI demand and spending. The company delivered another strong quarterly beat, with revenue up 85% y/y, led by Data Center revenue growth of 92%. NVDA guided second-quarter revenue to $91 billion, plus or minus 2%, above consensus. CEO Jensen Huang provided upbeat commentary, noting that “demand has gone parabolic” given the arrival of agentic AI. Although Nvidia shares were modestly lower on the week through Thursday, the broader AI hardware trade remained firm, as illustrated by the iShares Semiconductor ETF (SOXX), which rose more than 3%. AI infrastructure spending and positive AI demand commentary remain powerful earnings and sentiment tailwinds for U.S. equities. 

New Federal Reserve (Fed) Chair Kevin Warsh was sworn in Friday. He steps into the role immediately faced with managing rising inflation. April Fed minutes signaled support for policy tightening if inflation persists, and market expectations continue to move accordingly. Per the CME FedWatch Tool, the probability of a higher Fed target rate by year-end has risen to 69.2%, versus a 0% probability one month ago. If monetary policy shifts in a more hawkish direction, that could lead to a more difficult backdrop for U.S. equities already navigating elevated energy prices. For now, resilient earnings growth and sustained AI capex continue to offset those concerns.