Market Recap - Friday May 22, 2026
Stocks Keep Climbing as AI Strength Offsets Rate and Consumer Concerns
U.S. stocks finished higher today, extending the market’s winning streak. The Dow rose 0.58%, the S&P 500 gained 0.37%, the Nasdaq added 0.19%, and the Russell 2000 outperformed with a 0.91% gain. The S&P 500 has now risen for eight straight weeks, its longest weekly winning streak since 2023, and sits just below its record closing high.
The main story was market resilience. Stocks held up despite renewed upward pressure on short-term Treasury yields after Fed Governor Waller sounded more cautious on inflation and said he supports removing the Fed’s easing bias. Final May consumer sentiment also fell to a fresh record low, while inflation expectations moved higher, adding to concerns that consumers remain deeply frustrated by high prices.
Technology was mixed, but semiconductors remained strong, helped by continued AI enthusiasm. AMD rose after announcing plans to invest $10 billion to expand AI chip production, while Texas Instruments gained after an upgrade tied to rising data-center power needs. Workday also rallied after a strong earnings report, with investors encouraged by better subscription revenue, AI traction, and stronger margin guidance.
Retail earnings showed a split consumer picture. Ross Stores jumped after reporting a record 17% comparable-sales increase, showing continued strength in off-price retail as shoppers look for value. However, BJ’s Wholesale fell despite beating earnings estimates, as comparable sales came in slightly light and gross margins were pressured by pricing investments. The broader takeaway remains that consumers are still spending, but they are increasingly price-sensitive.
The macro backdrop was more complicated. Final May consumer sentiment dropped to 44.8, a new record low, while one-year inflation expectations rose to 4.8% and longer-run expectations climbed to 3.9%. That keeps pressure on the Fed, especially with energy prices and Middle East uncertainty still feeding inflation concerns. Warsh was also sworn in as the new Fed Chair, adding another layer of focus around how the central bank may communicate policy going forward.
Geopolitical headlines remained noisy. Investors continue to assume the U.S.-Iran conflict will eventually move toward a negotiated outcome, but key issues remain unresolved, especially Iran’s uranium stockpile and free navigation through the Strait of Hormuz. Oil was choppy but ended slightly higher.
Here’s Our Take
Today’s market action showed that investors are still willing to buy stocks, even with higher rates, weak consumer sentiment, and geopolitical uncertainty. That is a sign of strong underlying risk appetite, but it also means expectations are high.
The AI trade remains the market’s strongest engine, but the broader economy is sending mixed signals. Corporate earnings still point to resilient spending, especially among higher-income consumers, while sentiment data tells a much more cautious story. This gap between what consumers say and what they do remains one of the most important dynamics to watch.
The Fed is also becoming more complicated. With inflation expectations moving higher and Waller sounding less dovish, markets may need to accept that rate cuts are not coming soon. For stocks, that means earnings growth and AI momentum will need to keep doing more of the heavy lifting.
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