The Major Markets delivered a mixed performance last week, with the major averages masking growing weakness beneath the surface. The S&P 500 finished up just 0.1%, while the Nasdaq slipped 0.1% and the Dow fell 0.2%. Smaller stocks struggled significantly, with the Russell 2000 and S&P Mid Cap 400 both dropping 2.4% as rising Treasury yields pressured economically sensitive areas of the market.

Inflation remained the key macro story after hotter-than-expected CPI and PPI reports reinforced concerns that price pressures remain sticky. The Consumer Price Index came in slightly higher than expected with a 3.8% year over year reading.

April’s Producer Price Index came in much hotter with a headline reading of 1.4% compared to the 0.5% expected. The year over year reading saw a rise to 6.0% over March’s reading of 4.3% as Energy prices have become more significant in the inflation numbers.

Treasury yields climbed throughout the week as investors pushed back expectations for Fed rate cuts. As of Friday, the CME Group saw higher probabilities of rate increases at upcoming FOMC Meetings.

Leadership narrowed considerably beneath the surface. Energy was the clear standout, surging nearly 6.75% as oil prices climbed on fears surrounding potential disruptions tied to the Strait of Hormuz. Meanwhile, rate-sensitive sectors struggled, including consumer discretionary, real estate, materials, and utilities. Homebuilders were especially weak as higher yields pressured housing affordability.

Overall, the week highlighted an increasingly fragile market backdrop. AI enthusiasm and mega-cap tech resilience helped keep the major indices near record highs, but narrowing breadth, rising yields, stubborn inflation, and surging oil prices created mounting pressure beneath the surface.