Markets Supported by Growth, Earnings, and AI

1. Economic Data Continues to Support the Bullish Case Markets continued to build on their recent recovery, with the S&P 500 gaining 5.3%, the Dow Jones Industrial Average rising 2.9%, and the Nasdaq advancing 10.6%.¹ Since the March 30th lows, the rebound has been even more impressive, with the S&P 500, Dow Jones Industrial Average, and Nasdaq climbing 19.7%, 13.1%, and 32.2%, respectively.² While geopolitical uncertainty remains in focus, the strength of the economic data continues to provide an important foundation for markets.

Recent economic releases largely reinforced the view that the economy remains stronger than many expected. The Atlanta Fed GDPNow tracker is currently running at 3.8%,³ while labor market conditions remain healthy. Weekly initial jobless claims came in at 215,000, with the four-week moving average holding at 209,000,⁴ levels that remain well below those typically associated with economic weakness. At the same time, durable goods orders rose 7.9%, nearly double expectations,⁵ highlighting continued strength in business investment and manufacturing activity. Core PCE inflation came in at 3.3% year-over-year, slightly elevated but largely in line with expectations, suggesting inflation remains sticky but is not accelerating materially.

Perhaps most notable was the Chicago PMI, which surged to 62.7, its strongest reading since March 2022.⁶ The improvement supports themes we have discussed for several years, including the ongoing reshoring of manufacturing activity to the United States and the growing impact of the AI investment cycle. As spending continues to flow through semiconductors, power infrastructure, industrial equipment, transportation, and manufacturing, the broader AI food chain is increasingly becoming a meaningful contributor to economic growth and corporate earnings.

2. AI Infrastructure Remains a Powerful Tailwind The AI investment cycle continues to reinforce the view that this is a structural technology revolution rather than a short-lived trend. We continue to see evidence throughout earnings season as technology companies report strong demand tied to cloud infrastructure, semiconductors, networking, and enterprise software. While the benefits have been most visible within technology thus far, we believe industrials, power infrastructure, transportation, and even financials will increasingly participate as capital spending flows through the broader economy.

Many of the companies most closely tied to the AI ecosystem have delivered substantial gains, including Marvell Technology, Snowflake, IBM, Dell Technologies, and ServiceNow. While we remain constructive on the long-term opportunity, the magnitude of recent moves highlights the importance of remaining disciplined and avoiding the temptation to chase performance. The more compelling opportunity may be identifying the next beneficiaries across the broader AI food chain as investment continues to expand beyond the hyperscalers and semiconductor manufacturers.

At the same time, the rapid pace of AI-related investment is contributing to supply constraints across key inputs such as computing power, memory, and copper. These shortages are helping keep inflation pressures elevated even as other areas of the economy normalize. While a resolution to the conflict in Iran could help ease certain inflationary pressures, particularly through lower energy prices, inflation is likely to remain above trend given the strength of economic growth.

3. A Busy Week for Earnings and Economic Data This week brings an important mix of corporate events and economic releases that should provide additional insight into both market leadership and the underlying health of the economy. Within technology, investors will be watching whether recent momentum can continue, particularly among cybersecurity players such as Palo Alto Networks and CrowdStrike. Both stocks have enjoyed strong rallies in recent months as concerns surrounding a software and AI-driven disruption cycle have begun to fade. Instead, investors are increasingly recognizing the mission-critical nature of cybersecurity spending and the growing importance of securing AI-enabled infrastructure.

On the macro front, the calendar is equally important. Investors will receive several key labor market and economic updates, including nonfarm payrolls, JOLTS job openings, ADP employment data, ISM Manufacturing, ISM Services, unit labor costs, and productivity figures. Together, these reports will help shape expectations around economic growth, labor market conditions, inflation pressures, and ultimately the path of Federal Reserve policy. With markets having rallied significantly off the March lows, both earnings and economic data will play an important role in determining whether the recent momentum can be sustained.

4. Fixed Income U.S. Treasury yields ended the week lower across the curve, driven by optimism around a potential agreement to reopen the Strait of Hormuz and softer-than-expected economic data. By Friday’s close, the 2-, 10-, and 30-year yields had declined by 12, 12, and 9 basis points, respectively.⁷

Credit markets proved resilient with tightening evident across both the investment-grade and high-yield sectors amid broad improvement in risk appetite. Investment-grade spreads moved 1 bp tighter to +105, while high-yield spreads narrowed 2 basis points to +312. Concurrently, credit quality also improved with the main rating agencies issuing 36 upgrades and 34 downgrades. The Financial sector led with the most upgrades, while the Technology sector had the most downgrades. In the municipal-market, tax-exempt yields followed Treasuries higher, rising 8-15 basis points across the curve.⁸

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Return for Selected Indices⁹

Sources:

1. Bloomberg: As of June 1, 2026 ↩︎
2. Bloomberg: As of June 1, 2026 ↩︎
3. Federal Reserve Bank of Atlanta: As of May 28, 2026 ↩︎
4. Department of Labor: As of May 28, 2026 ↩︎
5. Bloomberg: As of May 28, 2026 ↩︎
6. Bloomberg: As of May 28, 2026 ↩︎
7. Bloomberg: As of June 1, 2026 ↩︎
8. Bloomberg: As of June 1, 2026 ↩︎
9. Bloomberg: As of June 1, 2026 ↩︎

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