The market and economy

• Major U.S. equity market indexes moved higher for the week ending May 22. The upturn was supported by expectations that the ongoing Middle East conflict would remain contained, along with strength in the technology sector, particularly artificial intelligence (Al)-related companies. The Dow Jones Industrial Average reached a record high, while the broad-market S&P 500 Index rose for the eighth consecutive week-its longest streak of positive returns since December 2023.
• President Donald Trump announced on Monday that he had canceled a military attack on Iran, which was scheduled for the following day, because there were "serious negotiations" on a peace plan that would be acceptable to the U.S. and countries in the Middle East. On Friday, U.S. Secretary of State Marco Rubio said that there had been "a little bit of movement" in negotiations for a deal to end the war. However, Rubio cautioned that there were disagreements over Iran's uranium-enrichment program and its plan to implement tolls on shipping in the Strait of Hormuz.
• There was notable news during the week regarding the Federal Reserve (Fed). On Friday, Kevin Warsh was sworn in as Fed chair, succeeding Jerome Powell, who will continue to serve on the Board of Governors. Minutes from the Federal Open Market Committee's (FOMC) April 28-29 meeting―Powell's last as Fed chair―indicated that members began to consider the need for interest-rate hikes. The committee voted to maintain the federal funds rate in a range of 3.50% to 3.75%. FOMC member Stephen Miran favored a 0.25% rate cut.Three other committee members supported the rate decision but were not on board with the relatively dovish tone of the central bank's policy statement.
• The FOMC meeting participants cited the continued economic impact of the Middle East war, as higher energy prices have fueled a rise in inflation. "A majority of participants highlighted...that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent," according to the meeting minutes. "To address this possibility, many participants indicated that they would have preferred removing the language from the post-meeting statement that suggested an easing bias regarding the likely direction of the Committee's future interest rate decisions." 
• The University of Michigan's final Index of Consumer Sentiment for May fell 5.0 points (-10.0%) to 44.8, and declined 7.4 points (-14.2%) year-over-year. Consumers' expectations for inflation over the next 12 months edged up 0.1 percentage point to 4.8% in May, while long-run inflation expectations rose 0.4 percentage point to 3.9%. In a statement announcing the survey results, the University of Michigan commented, "Consumer sentiment fell for the third straight month as supply disruptions in the Strait of Hormuz continue to boost gasoline prices. Sentiment is now just below the previous historical trough seen in June 2022."
  There were mixed data reports this week concerning the health of the U.S. residential real-estate market. New housing starts fell 2.8% to an annual rate of 1,465,000 in April, but increased 4.6% year-over-year, according to the Census Bureau. The downturn in April was attributable mainly to an 11.0% decline in new construction activity in the South region. New housing starts in the West region surged 49.0% over the previous 12-month period, offsetting decreases of 3.2%, 9.6%, and 3.2% in the Northeast, Midwest, and South, respectively. The number of building permits, an indicator of new construction activity in the near term, rose 5.8% in April, but edged down 0.2% over the previous 12-month period.  
  According to the Federal Home Loan Mortgage Corporation (Freddie Mac), the average interest rate on a 30-year fixed-rate mortgage climbed 15 basis points (0.15%) to a nine-month high of 6.51% during the week ending May 21. The Mortgage Bankers Association (MBA) reported that mortgage applications in the U.S. fell 2.3% during the week ending May 15 compared to the previous week. The MBA's Refinance Index inched down 0.1% for the week but was up 35.0% over the previous 12-month period. The Purchase Index recorded a weekly decline of 5.0% but increased 8.0% year-over-year. 

Stocks

• Global equities garnered positive returns during the week. Developed markets outperformed emerging markets.
• U.S. equities posted gains for the week. Healthcare and utilities were the top-performing sectors, while communication services and consumer staples were the primary market laggards.
• Value stocks outperformed growth stocks, while small caps surpassed large caps.
   

Bonds

• The 10-year U.S. Treasury note yield dipped to 4.56% during the week.
• The U.S. bond market ended the week in positive territory. 
• Corporate bonds led the market, followed by high-yield bonds and government bonds.

IMPORTANT INFORMATION

Index returns are for illustrative purposes only and do not represent actual investment performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Past performance does not guarantee future results. This material is provided by SEI Investments Management Corporation (SIMC) for educational purposes only and is not meant to be investment advice. The reader should consult with his/her financial advisor for more information. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. There are risks involved with investing, including possible loss of principal. SIMC is a wholly owned subsidiary of SEI Investments Company.

The information contained herein is for general and educational information purposes only and is not intended to constitute legal, tax, accounting, securities, research or investment advice regarding the strategies or any security in particular, nor an opinion regarding the appropriateness of any investment. This information should not be construed as a recommendation to purchase or sell a security, derivative or futures contract. You should not act or rely on the information contained herein without obtaining specific legal, tax, accounting and investment advice from an investment professional. 

Information in the U.S. is provided by SEI Investments Management Corporation (SIMC), a wholly owned subsidiary of SEI Investments Company (SEI).