KEY POINTS
- The S&P 500 closed at 7,580.06, the Dow at 51,032.46, and the Nasdaq at 26,972.62 on Friday — all record closes — as futures point to a slightly higher open Monday.
- The Nasdaq's 8%-plus gain in May, its best month since November 2024, was powered by a broadening AI trade and easing geopolitical risk from the U.S.-Iran ceasefire deal.
- ISM Manufacturing PMI lands at 10 a.m. ET today, with Friday's nonfarm payrolls report the week's main event for rate-path traders.
Wall Street enters June trading near the highs of a rally that added trillions in market value during May, with S&P 500 futures ticking up roughly 0.2% in pre-market trading Monday. All three major indices closed at fresh all-time records Friday — the S&P 500 at 7,580.06, the Dow Jones Industrial Average at 51,032.46, and the Nasdaq Composite at 26,972.62 — capping a month that rewarded risk-takers across nearly every corner of the equity market.
The numbers tell the story of a market firing on multiple cylinders. The Nasdaq surged more than 8% in May, the S&P 500 advanced roughly 5%, and the Dow added 3%. First-quarter S&P 500 earnings are on track to climb almost 29% year-over-year, with AI-related heavyweights doing much of the lifting.
Two Tailwinds Converged
The rally was not built on tech alone. A 60-day memorandum of understanding between the U.S. and Iran to extend their ceasefire sent oil prices tumbling roughly 20% from 2026 highs, pulling Brent crude to $92.56 and WTI below $88. That collapse in energy costs acts as a de facto stimulus for consumers and corporates alike, and it was the catalyst that brought cyclical sectors along for the ride in the final week of May.
At the same time, the AI trade broadened meaningfully. Where Nvidia once dominated every AI-related conversation on trading desks, May saw a rotation into memory and CPU names. Intel and AMD each gained roughly 25% on the month, and Micron surged 37% on its way to a $1 trillion market cap. A Mizuho analyst described it as a "changing of the guard in AI," and for now, the broader participation is a healthy signal for the bull market's durability.
What Could Slow the Tape
Not everything in the backdrop is supportive. The 10-year Treasury yield rose to 4.47% Monday morning, recovering from three-week lows, and the bond market is increasingly uncomfortable with inflation readings that refuse to cooperate with the Fed's 2% target. April's headline PCE came in at 3.8% year-over-year — the highest since May 2023 — and core PCE sits at 3.3%. Markets are now pricing a 46% probability of a Fed rate hike by December, a dramatic shift from the cut expectations that dominated the start of the year.
The economic calendar this week will test the rally's resilience. The ISM Manufacturing PMI drops at 10 a.m. ET today and arrives after the Chicago PMI's stunning surge to 62.7 from 49.2 in April — a 13.5-point jump that crushed the 50.5 consensus. If the national ISM number confirms that kind of manufacturing strength, it bolsters the growth story but could also stoke rate-hike fears.
The Week Ahead
Beyond today's ISM print, ADP employment data arrives Wednesday and the Bureau of Labor Statistics nonfarm payrolls report hits Friday morning. April's payrolls came in at a soft 115,000, and any material upside surprise in the May number could push Treasury yields higher and pressure the multiple on growth stocks that powered this rally. Conversely, another soft reading would reinforce the "Goldilocks" narrative — growth resilient enough to support earnings but cool enough to keep the Fed on hold.
The S&P 500's next technical test sits at 7,600, the round-number resistance level traders will be watching. With record earnings growth, a disinflationary oil backdrop, and broadening AI participation, the path of least resistance remains higher — provided this week's data cooperates. The first trading day of June sets the tone, and bulls have momentum firmly on their side.
