The Major Markets closed higher across the board ahead of the Memorial Day Weekend. Last week was noteworthy for the rotation that seemed to take place as the recent dominate leaders of the Nasdaq and the S&P 500 took a backseat to the more concentrated Dow Jones and the small cap Rusell 2000.

This was further evidenced by the performance of the style boxes which saw large cap growth lag and small cap value lead. That said, the gain of 88 basis points in the S&P 500 was welcomed. Furthermore, as volatile as the stock market or the greater economy or geopolitics has felt recently,  last week’s positive performance actually stands as the 8th consecutive weekly gain since the end of March. Said differently, every week this quarter has so far been positive. The last time we saw a consecutive weekly run this long was at the close of 2023.

Two of the main drivers of late have been earnings and oil. As FactSet pointed out last week, 94% of S&P 500 companies have reported their earnings result with 84% of those companies beating their expectations. This exceeds recent historical averages in both the number of companies beating estimates as well as the magnitude of the surprises.

That said, oil continues to be a heavy concern on market participants. Oil prices have fallen off the April highs and even the recent retests of highs in May have fallen short of the level that we saw last month. Nevertheless, the cumulative impact of higher prices have begun to be felt more and more in the larger economy.

The EIA is set to report the May national average of all grades and all formulations of gasoline later this week. While April’s reading of roughly $4.25 was nowhere near as high as the peak of Summer 2022, it was still higher than the Summers of 2008, 2012, 2014, and 2023.

This element has popped up in a few different earnings calls. Walmart was one of the more notable companies which highlighted this dynamic in their call last week, the CEO spoke about stressed consumer and the potential for higher store prices in the future. And while they had a slight positive earnings surprise, their share prices fell as a result.

The CME Group has followed this reasoning further forward with the greater probabilities of the Fed Funds rate now firmly reflected a rate increase at the turn of the year compared to a rate decrease as previously thought.