U.S. stocks closed higher on Friday, May 23rd, with the Dow Jones Industrial Average reaching a new all-time high. All three major indices posted gains for the week. Investors are closely monitoring the progress of U.S.-Iran negotiations. Kevin Warsh was sworn in as the new Chairman of the Federal Reserve.
The Dow Jones Industrial Average rose 294.04 points, or 0.58%, to close at 50,579.70. The Nasdaq Composite gained 50.87 points, or 0.19%, to finish at 26,343.97. The S&P 500 increased by 27.73 points, or 0.37%, ending at 7,473.45.
For the week, the S&P 500 advanced 0.88%, marking its eighth consecutive weekly gain. This represents its longest weekly winning streak since a nine-week run that ended in late 2023. The Dow Jones gained 2.1% this week, its third weekly gain in four weeks. The Nasdaq Composite rose 0.45%, marking its seventh weekly gain in the past eight weeks.
The investment boom in artificial intelligence infrastructure continues to drive the market. Nvidia's VR200 rack's PCB (Printed Circuit Board) value has tripled compared to the previous generation, leading to a collective surge in PCB-related stocks. Memory chip stocks were also active, with SanDisk rising over 10% and Micron Technology gaining more than 4%.
The market holds a positive view on the AI investment surge. Analysis points out that the S&P 500 Information Technology sector now accounts for over one-third of the index's total capital expenditures, reaching a record 35%. Investors view AI spending as a sustainable catalyst for profits.
Market volatility intensified this week as investors grappled with a sharp rise in long-term Treasury yields. The yield on the 30-year Treasury bond briefly climbed above 5.19% earlier in the week, reaching its highest level since before the financial crisis, before retreating to 5.09% on Thursday.
Oil prices also fluctuated as traders assessed the prospects for a resolution to the U.S.-Iran war. On Friday, both Brent crude and West Texas Intermediate crude rose approximately 2%.
Both the United States and Iran have indicated progress in talks to end the war, but disagreements remain over Tehran's stockpile of enriched uranium and the issue of transit fees for the strategically vital Strait of Hormuz.
U.S. Secretary of State Marco Rubio stated on Thursday that there were "good signs" that an agreement to end the conflict was close, but he warned that any such deal would be "unworkable" if Iran took action to permanently control shipping through the Strait of Hormuz.
Rubio stated, "No one in the world supports a transit fee regime. It cannot happen and is unacceptable." He added, "If we cannot reach a good deal, the President has made it clear he has other options," without elaborating.
Shortly before this, Iran stated that the latest U.S. proposal brought the warring parties closer to a peace agreement. Iran is currently reviewing the U.S. position, with both sides continuing to exchange information based on a 14-point original framework proposed by Iran weeks ago.
Adam Crisafulli, founder of Vital Knowledge, said in a report, "Our view on Iran remains the same as before: the likelihood of a deal is far greater than no deal, but this is already priced in, and the conflict will have a stagflationary impact for at least the next few quarters."
On the macroeconomic front, market focus centered on the leadership change at the Federal Reserve. Kevin Warsh was officially sworn in as Chairman of the Federal Reserve at the White House on Friday, succeeding Jerome Powell, who served for eight years. At the swearing-in ceremony, President Trump emphasized that he wanted Kevin to be "completely independent, don't look at him, don't look at anyone, just do your own thing."
The 56-year-old Warsh becomes the 11th Chairman of the Federal Reserve in the modern banking era, taking over from Jerome Powell, who served for eight years.
Powell, who refused to cut interest rates as quickly or as deeply as Trump desired, has been a primary target of the President's frustration. He will remain at the Fed as a Governor, the first former Fed Chair to do so in nearly 80 years.
Friday's swearing-in ceremony marks Warsh's second tenure at the Federal Reserve. He served as a Federal Reserve Governor from 2006 to 2011, a period during which the central bank worked with Treasury officials to rescue the economy from the global financial crisis.
Although Warsh assisted in the Fed's efforts, he later criticized the central bank for allowing crisis-era policies to persist and for exceeding its mandates of price stability and low unemployment. For instance, he has pointed to previous efforts addressing climate change and social inequality as mission creep and has pledged to reduce the central bank's influence on markets.
However, the macroeconomic environment Warsh inherits differs significantly from what President Trump initially envisioned. Since the U.S.-Israel war against Iran began in late February, the closure of the Strait of Hormuz has kept energy prices persistently high, intensifying inflationary pressures. Investor expectations have begun to reverse, with a growing number of market participants believing the Fed's next move could be a rate hike rather than a cut.
The chief U.S. economist at BofA Securities noted that the impact of the U.S.-Israel war on Iran might necessitate the Fed raising interest rates by approximately 1 percentage point. The continued rise in U.S. Treasury yields reflects the market's reassessment of a new normal of higher rates.
Against this backdrop, the challenge for Warsh lies not only in managing inflationary pressures but also in establishing his own credibility between the political influence of the Trump administration and the independence of the Federal Reserve. In late trading, investors were closely watching for potential volatility heading into the weekend.
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