US Market soars on last week of May 2026 ?

For the whole of last week, there were a handful of US economic reports out.

I half suspect that they did not make any meaningful impact on the US market.

This is because, even the increasing negative CPI inflation report, hardly dented the US market, the week before when it was released.

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Reports out last week’s include:

• 19 May 2026 - Pending Home Sales.

• 20 May 2025 - Minutes of Fed’s FOMC 

• 21 May 2026 - US jobless claims.

• 21 May 2026 - S&P Flash US services PMI.

• 21 May 2026 - S&P Flash US manufacturing PMI

• 22 May 2026 - US Leading Economic Indicators (LEI).

• 22 May 2026 - US Consumer Sentiments (Final) for May 2026

Pending Home Sales.

According to the National Association of Realtors (NAR), US Pending home sales (MoM) for April 2026 rose to 1.4% vs market consensus of 1.0% vs last month’s upwards revised 1.7%. (see above)

Economists polled by Reuters had forecasted contracts, which become sales after a month or two, increasing 1.0%. 

Growth as always has been uneven:

• Contracts surged +6.6% in the Northeast.

• Advanced +3.0% in the Midwest region. 

• They climbed +0.4% in the West.

• Finally a fall of -​0.7% in the South. 

April 2026’s home sales incidentally is the 3rd straight month of increase, attributed mainly to temporary retreat in mortgage rates, pulling buyers back into the market. 

Economists, however, remained unfazed by the larger-than-expected rise.

This is because they expect demand for houses to remain subdued for 2026, noting that mortgage rates remained very high ​relative to the start of the year. 

FOMC Minutes of April 2026 meeting.

The April 2026 meeting’s minutes showed that Fed officials are more concerned about inflation than the labour market at that moment.

This came about after inflation being stoked by the Iran war intensified last month, with a growing number of FOMC members open to the possibility ​that interest rate may even need to rise.

The minutes also noted the policy makers felt "some policy firming would be appropriate" if inflation stays persistently above the central bank's 2% target, 

As a result, the odds of a rate cut at the December 2026 Fed meeting has dropped to 30%.  

For the coming June 2026 FOMC meeting, the probability of an interest rate hike is already showing up. (see below)

The meeting also featured 4 dissenting votes against decision to hold interest rate in the current 3.50% - 3.75% range, with the departed Stephen Miran as one of the guilty party.

This marked the highest number of dissents seen since 1992. 

Jobless Claims.

Bloomberg economists pointed out that current employment environment is still exhibiting a typical "low-hiring, low-layoff" state, and the unusually low initial claims figures may also be affected by stricter anti-fraud controls.

Analysts further added that such resilient employment data effectively dampens the market's optimistic pricing for US Fed to initiate rate cuts for the rest of 2026, giving officials the confidence to continue maintaining a "Higher for longer" high-interest rate environment.

(1) Weekly Jobless claims.

For week ending 16 May 2026, weekly claims fell by -3,000, to 209,000 vs market consensus of 210,000 vs previous week’s upwards revised 212,000. (see below)

The 4 week average that smooths out short-term volatility, declined to 202,500, remaining at a relatively low level in recent years.

(2) Continuing Claims.

Unfortunately, the same could not be said about the Continuing jobs claims report.

For week ending 09 May 2026, continuing claims rose by +6,000, to 1.782 million vs analysts’ estimates of 1.79 million vs previous week’s 1.776 million.

US labour market could still soften.

A survey from S&P Global on Thu, 21 May 2026 showed private sector employment dropping to a ​21-month low in May 2026, with services businesses citing "growing concerns over rising costs and deteriorating demand conditions.".

Economists are anticipating that accelerating inflation will erode demand and undercut economic growth.

This is what newly sworn-in Fed chair Kevin Warsh will have to deal with as he ‘promised’ - he would lead a "reform-oriented" Fed that escapes static economic frameworks and upholds clear standards of integrity.

He has historically argued that the Fed has misunderstood how inflation gets embedded in the economy and has focused too heavily on growth.

Now at the helm, he has a chance to plea his case, as the world watches on the trick/s he will pull out from under his sleeves.

S&P Flash US services PMI.

The preliminary S&P Flash US Services PMI for May 2026, dropped slightly to 50.9, missing the 51.1 consensus and marginally lower than finalized April 2026’s 51.0. (see below)

Granular report highlights slowing demand, job cuts at the fastest rate since May 2020, coupled with a sharp spike in input costs, driven by Middle East geopolitical conflicts that is coming to 3 months old and still no-sign of easing.

New business inflows remained highly subdued, and export orders suffered their sharpest drop in 6 months as consumer demand was pressured by rising prices.

Input costs for services providers spiked at the fastest rate in a year.

Because of this, companies raised their own selling prices to customers at the steepest rate since August 2022, compounding inflation worries for US Federal Reserve.

Preliminary report for May 2026 - Services & Manufacturing PMI

S&P Flash US Manufacturing PMI.

In contrast the preliminary May 2026 Flash S&P Global US Manufacturing PMI unexpectedly jumped to 55.3, marking a 4 year high. (see above)

This is higher than market consensus of 53.8 and April 2026’s finalized 54.5. But it was not organic consumer demand driven.

At first glance, it seems to signal robust sector expansion, the granular details revealed a complex picture driven by:

• Businesses boosted their input inventories at the sharpest rate in nearly a year as a safety net against ongoing supply chain disruptions.

• Heightened geopolitical tensions in the Middle East and related shipping disruptions caused significant logistical headaches. Supplier delivery times lengthened to the greatest degree since August 2022.

Leading Economic Indicators

On 22 May 2026, US Conference Board released the US Leading Economic Index (LEI) for April 2026.

The index inched up marginally by +0.1% to a reading of 97.4 (based on a 2016 baseline).

This slight gain reverses only a fraction of the -0.6% decline recorded in March 2026 and is ‘higher’ than market consensus of -0.1%.

Pessimistically speaking, over the past 6 months (between October 2025 - April 2026), the LEI contracted by -0.7%.

This marks a slightly less severe rate of decline compared to the previous 6 -month period (April 2025 - October 2025), where it fell by -1.0%, still it is not a cause for celebration really.

Many analysts attributed the April 2026 uptick ‘improvement’ was largely driven by (a) a rebound in stock prices and (b) an increase in building permits for multi-family units.

It helps too that heavy investment in AI infrastructure & Energy production is helping sustain business spending.

Conversely, weak hiring and higher energy costs are anticipated to weigh on household purchasing power in the coming months, reinforcing the challenges facing new Fed Chair, Kevin Warsh on whether to raise interest rate, instead of trimming it.

Overall, the Conference Board's indicators suggest that while US economic expansion should continue, it will likely proceed at a modest pace.

Fragile conditions remain, as the LEI’s 6 month & 12 month growth rates remain negative.

US Consumer Sentiments.

The final readings of US Consumer Sentiments for May 2026 plummeted to an all-time historical low of 44.8.

It is down significantly from the mid-May preliminary reading of 48.2 and previous month’s final reading of 49.8.

This is also the 3rd straight month of decline that sees the index sinking below the previous historical trough seen in June 2022.

No prize for guessing what is the key catalyst, despite the Trump administration announcing over the weekend that the ‘truce’ (not peace deal) with Iran is about to be inked.

Cost of living remained the primary concern, with 57% of surveyed consumers noting that high prices were eroding their personal finances.

Consumers became significantly more worried that inflation will spread and persist.

The 1-year ahead inflation expectation rose to 4.8%, while the 5 yr - 10 yr long-term inflation outlook spiked to 3.9%.

My viewpoints : (mine only)

After spending time to consolidate all the US economic reports, this is what I think.

Last Week.

US stock market ended the week on a strong note, with the $Dow Jones(.DJI)$ rising by +2.22%for the week and closing at a new all-time high of 50,579.70 on Fri, 21 May 2026.

The positive performance was driven by a broadening of the AI investment theme beyond GPU makers into a wider value chain, strong corporate earnings from select companies, and resilient consumer confidence data.

However, persistent inflation concerns and mixed manufacturing data suggest the rally's sustainability warrants caution.

This Week.

I think US market will continue to face a cautious and potentially slightly negative bias in the last week of May.

This as the 2nd revision to US Q1 2026 GDP report and the Fed’s preferred inflation report - the personal consumption expenditure (PCE) for April will be out on the last trading day of May 2026 - the 29th.

Fed’s NowCasting.

Above is Reserves Bank of Cleveland estimates on US’s PCE and core PCE for April 2026:

• Headline PCE (MoM) will be 0.4 vs March 2026’s actual of 0.7; a -0.3% dip.

• Headline PCE (YoY) will be 4.6 vs March 2026’s actual of 3.5%; a +1.1% increase.

• Core PCE (MoM) will be 0.27 vs March 2026’s actual of 0.3%; a miniscule -0.03% dip.

• Core PCE (YoY) will be 3.36 vs March 2026’s actual of 3.2%; a +0.16% increase.

Sure looks like inflation is slowly but surely creeping back into US economy, like it or not.

Many analysts are of the opinion that even if a truce is reached between US and Iran, the road ahead for a return to normalcy will still be many months away - that is assuming negotiations between Iran and US are without a hitch or stumbling block.

This means rising inflation will still be on-going, like it or not.

This macro backdrop is a mix of persistent inflationary pressure and a weakening consumer, is likely to cap bullish sentiment.

This makes the "Sell in May and go away" adage appears to have more validity this year than in recent history.

This, as the fundamental headwinds building since April 2026 are unlikely to reverse in the final week of May 2026. Agree ?

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• Do you think it will be prudent to sell (full or partial) in May 2026 and wait for clearer directions?

• Do you think US inflation will continue to rise (albeit more gradual) even if a “truce” of sort is signed between US and Iran ?

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