Markets close May at records as earnings and AI lift stocks

U.S. stock indexes finished May at record closing highs. The Nasdaq gained 8.4% for the month, the S&P 500 rose 5.3% and the Dow advanced 2.9%. The S&P 500 logged its best two-month advance since May 2020, rising more than 16% since the end of March.

Corporate results and technology names led the rally. Nearly two-thirds of S&P 500 companies reported year-over-year revenue growth of at least 5%, the largest share since 2023. The median Russell 3000 company posted 10% earnings-per-share growth in Q1 2026, the strongest pace since Q3 2021. International developed equities rose about 4.5% in May and U.S. mid-cap stocks gained roughly 2.5%.

Inflation readings and higher yields weighed on fixed income. The Consumer Price Index for May came in at 3.8% year over year, the highest since May 2023, and the Producer Price Index ran at a 6.0% annual rate, the strongest since late 2022. Higher energy costs tied to the conflict in the Middle East were a major contributor to the rise in price levels.

Bond yields moved higher in response. The 30-year Treasury yield reached about 5.2% in mid-May, its highest level since 2007, and the 10-year yield rose above 4.6% before easing later in the month after reports of progress toward a regional peace agreement and possible reopening of the Strait of Hormuz.

Kevin Warsh was sworn in as Federal Reserve chair on May 22 and pledged to “lead a reform-oriented Federal Reserve” and to preserve the central bank’s independence. Fed Governor Lisa Cook warned that “the risks remain tilted toward higher inflation” and indicated readiness to raise rates if price pressures persist. Market pricing reflects an expectation that the Fed will hold rates through year-end and assigns about a 41% probability of a rate increase in December.

Credit markets posted modest gains in May. Investment-grade corporate bonds returned about 0.7%, high-yield credit added 0.5%, and municipal bonds rose roughly 0.3%. Commodity performance was mixed: silver rose about 2.5%, crude oil fell 12.2%, broad commodity indexes declined about 3.4% and gold was down roughly 1.5%.

The Citi Economic Surprise Index diverged between regions, rising to around +40 in the U.S. and falling to near -80 in Europe. Market observers attributed part of the European weakness to that region’s greater exposure to Middle Eastern energy disruptions.

A major initial public offering is scheduled in the coming weeks. SpaceX is set to list on the Nasdaq in June with an estimated valuation near $1.8 trillion. Historical data for large U.S. IPOs shows a median one-year return of minus 31% among past mega-listings; Airbnb and Arm were exceptions that posted positive first-year returns. Major benchmarks are considering faster entry rules that would allow very large new listings to join indexes shortly after debut, a change that could prompt substantial passive buying by ETFs and index funds soon after a listing.