NEW YORK, May 22 – Wall Street’s remarkable rally could encounter obstacles in the coming days as the exceptional corporate earnings period concludes and market participants grapple with a complex environment of climbing inflation and increasing bond yields.
The S&P 500 index experienced some volatility this week yet stays within 1% of its record peak, posting gains exceeding 8% year-to-date. Strong corporate performance has enabled market participants to overlook challenging elements including elevated yields, climbing oil costs, and the continuing U.S.-Israeli conflict with Iran, according to Anthony Saglimbene, chief market strategist at Ameriprise. However, he noted that “company reporting is kind of done now.”
“Investors are moving beyond the earnings season, and the macro environment is starting to take more center stage,” Saglimbene explained, noting the upcoming shortened trading period due to Monday’s Memorial Day holiday.
Bond market declines have created anxiety on Wall Street. The 10-year Treasury benchmark reached its peak level since January 2025 this week, while the 30-year yield climbed to its highest point since 2007. Rising yields, which occur when bond values decline, create obstacles for equities by applying pressure on valuations and resulting in increased borrowing expenses for both consumers and corporations.
Primary drivers pushing yields upward include inflation concerns and conflict-related energy cost increases.
“Inflation concerns continue to flare,” stated Jim Baird, chief investment officer with Plante Moran Financial Advisors. “You’re seeing upside in long-term Treasury yields that is kind of challenging the bond market and probably puts a practical lid on equities broadly if it persists for some period of time.”
UPCOMING INFLATION DATA
Thursday will bring inflation insights with April’s personal consumption expenditures price index figures. The PCE release, which serves as the Federal Reserve’s preferred metric for its 2% annual inflation objective, comes after concerning readings this month from other consumer and producer price measurements.
“It will be another data point that likely shows that months of elevated oil prices and supply disruptions are starting to feed through into inflation data,” Saglimbene predicted.
Inflation fears are increasingly influencing interest rate projections. Futures trading now reflects possible Federal Reserve rate increases later in 2026. Early this year, markets anticipated more stock-friendly rate reductions.
This week’s released minutes from the Fed’s most recent policy session revealed officials expressing greater worry that price increases during the U.S.-Israeli war on Iran might fuel inflation. More policymakers expressed openness to potentially raising rates.
“At best, I’d say you’re now in more of an extended pause scenario with the potential for a turn to rate hikes later this year if the inflation story continues to heat up,” Baird commented.
Additional economic information next week includes updated first-quarter growth figures and new consumer confidence measurements.
COSTCO, SALESFORCE CONCLUDE IMPRESSIVE Q1
With over 90% of S&P 500 firms having disclosed results, first-quarter earnings overall are projected to have increased more than 28% compared to the previous year, based on LSEG IBES information.
“I would say expectations for earnings and economic growth are pretty high,” noted Scott Wren, senior global market strategist at Wells Fargo Investment Institute. “That’s built into where stock prices are right now.”
Multiple major retailers will announce results next week, including Costco, Best Buy and Dollar Tree, as market watchers seek evidence that higher gas costs might be reducing other consumer purchases. Walmart stock dropped Thursday after the retail giant maintained its cautious annual sales and earnings projections.
Artificial intelligence, a significant factor in stock and earnings advancement, will remain prominent with reports from cloud software company Salesforce and Dell Technologies, a server manufacturer.
Semiconductor company Nvidia, whose performance is viewed as an AI market indicator, Wednesday projected second-quarter revenue of $91 billion, exceeding Wall Street predictions.
Nvidia’s “results help reinforce that robust AI-related spending trends remain intact,” said Brock Weimer, investment strategy analyst at Edward Jones, in written analysis.
