The S&P 500 posted its sixth consecutive weekly gain. Payrolls beat expectations. A gauge of chipmakers surged 11% in a week. WTI crude fell below $95 as the Iran deal moved closer to paper. The bears have been pointing to narrowness, high valuations, and sticky inflation. The market has been pointing in the other direction. Here is what drove the week and what to watch.
The dominant question entering this week was whether the labour market had started to crack. The April Non-Farm Payrolls number answered it: US employers added jobs for a second straight month, the first back-to-back advance in nearly a year. The jobless rate held steady. Consumer sentiment fell to a record low in the University of Michigan survey, driven by inflation anxiety. Markets ignored the sentiment data and focused on the jobs number.
This is the correct prioritisation. Sentiment surveys tell you how people feel. Payrolls tell you what they are doing. When people feel bad but continue to earn income and spend, markets follow the spending. The disconnect between survey-based pessimism and actual economic activity has been the defining feature of this entire cycle, and it continued this week.
The earnings picture provided the second pillar. With approximately 82% of S&P 500 companies having reported first-quarter results, the beat rate on profit estimates is running at one of the highest levels in years. Stock prices follow earnings, and earnings are growing too quickly for investors to discount, even with higher oil, sticky inflation, and a Fed on hold. That is the short answer to why the market is where it is.
The dollar softened slightly, the euro rose to $1.178, and sterling strengthened to $1.363. Yen was broadly stable at 157 per dollar. European equities were flat to marginally positive. Japanese markets extended gains modestly. The MSCI World Index rose 0.4% on the day, reflecting solid but not spectacular broad market performance outside the US.
The semiconductor rally deserves specific mention. A gauge of chipmakers rose 11% from the previous Friday's close. The Intel-Apple deal, confirmed by the Wall Street Journal, drove a significant portion of that move. Intel shares rallied sharply on the news that it has reached a preliminary agreement to build some of Apple's chips. This matters beyond the two companies: it signals that the US domestic semiconductor supply chain thesis, central to enormous investment in AI infrastructure, has a major new data point validating it.
Three corporate announcements from the week illustrate how the AI infrastructure investment cycle is deepening rather than plateauing. Nvidia announced an investment of up to $2.1 billion in data centre firm IREN as part of a partnership to accelerate AI infrastructure construction. Anthropic signed a $1.8 billion computing deal with Akamai Technologies to meet surging demand for its AI software. And Cerebras Systems moved to increase the price range on its IPO as investor demand for the AI chipmaker's shares continued to build.
Against this backdrop, CoreWeave posted a disappointing forecast, raising concerns about slowing growth despite heavy spending on data centre buildout. CoreWeave is worth watching precisely because it sits at the intersection of AI demand and infrastructure supply. If the hyperscalers start pulling back on commitments, CoreWeave will show it before the headline AI names do. This week's result is a flag, not a verdict.
The most significant geopolitical development of the week came from the Wall Street Journal: the US and Iran are working with mediators to formulate a memorandum of understanding that would set parameters for a month of formal talks to end the war. Iran's Foreign Ministry confirmed Tehran's response to the latest US proposal is "under review."
This is meaningful progress. A memorandum of understanding is a pre-negotiation document that establishes what will be discussed and how. Getting both parties to agree to its terms is the precondition for structured talks. The market has been pricing some probability of a deal for several weeks. The MOU language suggests those probabilities should move higher.
The practical consequence for energy markets is that WTI crude fell to $94.71 this week, with Brent in the low $100s, as Hormuz supply risk continued to recede. Each dollar off crude is a meaningful positive for India's import bill, the rupee, and the RBI's inflation management task.
With 82% of S&P 500 companies having beaten first-quarter earnings estimates and payrolls surprising to the upside, the Federal Reserve has no reason to cut rates in the near term. Money market pricing continues to suggest the Fed holds steady for the remainder of the year, with any cut now dependent on a material softening in either the labour market or the energy price picture.
Lindsay Rosner at Goldman Sachs Asset Management summarised the position clearly: strong data and inflation have likely put paid to any easing in the foreseeable future, though that could change depending on how energy prices and the Middle East situation develop. The Fed is essentially waiting on a variable it cannot control, which is the oil price, which is itself waiting on a geopolitical outcome that is closer but not yet resolved.
The three dissenters from last week's Fed statement, Kashkari, Hammack, and Logan, have not walked back their positions. The internal debate about whether the next move should be a cut or a hike remains live. The bond market is taking the right posture: the 10-year yield eased two basis points to 4.36%, a modest move that reflects neither panic about inflation nor confidence in imminent easing.
Indian equities closed the week with a modest gain of approximately 0.7 to 1.0%, with the Nifty 50 closing at 24,176. The supportive factor is straightforward: WTI at $94.71 is materially better for India than WTI at $102, which was the level two weeks ago. Each time crude falls, the current account arithmetic improves, rupee pressure eases, and the RBI has more room to manage domestic liquidity without defending the exchange rate simultaneously.
Mid-cap and small-cap indices continued to outperform large-cap benchmarks, which is consistent with a market where domestic retail investors and DIIs are driving flows rather than FIIs. FII selling pressure has not reversed but has moderated. The India VIX remained subdued, indicating that options markets are not pricing a volatility event in the near term.
The 10-year G-Sec yield was stable around 6.45%, tracking global yield moves broadly. The rupee held in a tight range. The RBI's liquidity stance remains the key domestic variable: any tightening to defend the currency against renewed FII outflows would put pressure on bank lending and the credit cycle. At current oil prices, that scenario is less likely than it was a fortnight ago.
The critical level to watch on the Nifty remains 23,650. A close above 24,200 with volume would signal the correction phase is complete and the index is resuming its prior trend. Until that confirmation arrives, the cautious posture is appropriate.
Tuesday 12 May: US CPI (April). This is the most important number of the week. A hot print, headline above 3.5% or core above 3.2%, would put the higher-for-longer narrative back in the driving seat and push bond yields higher. A cool print would revive September cut speculation and provide a further tailwind for risk assets. The oil pass-through from the Iran war period will be the key variable in the headline number.
Wednesday 13 May: US PPI (April). Producer prices lead consumer prices by one to two months. If PPI is running hot, it tells you the CPI trajectory for the next quarter is not comfortable even if this month's print is benign.
Thursday 14 May: US Retail Sales (April). Consumer sentiment hit a record low in the Michigan survey this week. Retail sales will tell you whether that anxiety is translating into actual spending restraint or whether the consumer is still spending despite feeling bad. The gap between the two, if it exists, will not last indefinitely.
Monday 11 May: India CPI. If inflation stays within the RBI's 2 to 6% comfort band, it keeps rate cut optionality on the table for the second half of the year. A surprise to the upside, driven by food prices or an energy pass-through, would complicate the RBI's position materially.
India earnings: Tata Motors, Bharti Airtel, Cipla, Dr. Reddy's, JSW Steel, Tata Steel, Power Grid. Tata Motors will indicate the health of domestic auto demand and Jaguar Land Rover's European exposure. Bharti Airtel's results will be watched for subscriber additions and ARPU trends, the two numbers that determine whether the telecom sector's pricing power is holding. Cipla and Dr. Reddy's together will indicate margin direction in pharma after a quarter of currency headwinds. JSW Steel and Tata Steel will give the clearest read on domestic infrastructure demand and realisation trends. Power Grid results will be monitored for commentary on capex approvals and the pace of the energy transition order book.
Iran MOU progress. If the memorandum of understanding language gets finalised and both sides confirm they are entering structured talks, expect WTI to move toward $88 to $90. That single development would be the largest positive macro event for India since the ceasefire was announced.
Six consecutive weekly gains on the S&P 500 during a war, with oil still above $90, with inflation sticky, with the Fed on hold, and with consumer sentiment at a record low. The bears have been correct about the risks. The market has been correct about the earnings. For now, the earnings are winning.
The question for the next two weeks is whether US inflation data validates the recent easing in bond yields or reverses it. If CPI surprises to the upside, the narrative shifts quickly. If it is benign, the path toward a September rate cut reopens and the equity rally has a fundamental reason to continue rather than just momentum.
For Indian investors, the week is binary on two fronts: domestic CPI on Monday, and any Iran deal development. Both are potentially more impactful for the Nifty than anything in the US earnings calendar.
The oil price is still the most important single variable for India. Everything else, earnings beats, Fed rhetoric, chip rallies, follows from whether crude stays on its current trajectory or reverses.
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