With no significant Iran escalation news, President Trump’s highly anticipated two-day summit with Chinese President Xi Jinping took the lead role on the geopolitical stage this week. For all the drawn-out lead-up to the meeting (it was postponed when the Iran war began), substantial announcements from it were lacking. That wasn’t terribly surprising though.

Heading into today (Friday), the S&P 500 was up over 1% and reached a new milestone, trading above 7500. Extending the winning streak to 7 straight weeks looked more likely than not, pairing nicely with the Knicks’ 7 game playoff winning streak. On Friday, however, equities stumbled as global rates moved sharply higher and crude strengthened. While there was no specific trigger for these moves, the lack of any concerted effort by China to pressure Iran to open the Strait following the Trump/Xi summit likely played a role. Oil and yields moved higher. The stretched levels of the S&P overall (RSI ~75 heading into Friday) and in particular the AI supply chain also opened the door for a reversal. On top of this it was an options expiration, triggering positioning and hedging resets.

The S&P fell 1% on Friday but managed to close the week modestly higher. The index extended its weekly winning streak to 7 and reached another round number milestone (7500) before pulling back. Like last week the S&P equal weight lagged. Small and mid-caps lagged significantly more, with most of the damage coming on Friday.

This week’s inflation data further eroded support for equities. Rates were hovering just below recent highs throughout the week and then finally broke out to the upside today clearing some key round/technical levels. Oil prices reversed pretty much all of last week’s declines with ICE Brent up ~8% trading ~$109.25.

Next week Nvidia will highlight the earnings reports and look provide enough positive commentary to continue the AI trade, but we’ll also get some big retailers reporting as well, including Home Depot, Lowe’s, Target, TJX, and Wal-Mart. On the macro side of things it will be a relatively quiet week. The minutes from the last FOMC meeting will generate some buzz. Flash PMIs will highlight the economic releases. Most importantly, the Knicks will begin their battle in the Eastern Conference Finals- opponent TBD. Enjoy your weekend.