Wall Street Hits Record Highs as Investors Balance Inflation, Fed Policy and Middle East Risks

Let's get to the big story.

Breakdown while Wall Street is eyeing historic highs as we entered the last week of May.

The S&P 500 is eyeing the 7500 mark and the Dow has 51,000 in its sights with earning season mostly in the rearview mirror.

We are officially entering a period of digestion and potentially distraction.

Now this week a slate of Wall Street broker conferences also covering everything from AI to software to leverage.

Now at the same time investors.

We'll be parsing commentary from these events as they weigh booming corporate profits against sticky inflation, a new Fed chair, and escalating geopolitical tensions in the Middle East.

Well joining us to cut through the noise is Michael Reinking, Senior Market Strategist at the New York Stock Exchange.

Good morning, Michael, and welcome back from the holiday weekend.

Yes, it was, it was a soggy one and usually when you come back from a 3 day weekend, you're kind of vibes are a little bit lower, but here New York City is abuzz as we have the New York Knicks.

Making the finals for the first time since 1999 and equity markets are kind of partying like it's 1999 as we head into the open.

Yes, and as you mentioned, we are eyeing some key levels here for the Dow as well as the S&P 500.

So as we head into this shortened week, we have a lot on tap.

So what matters?

Yes, so look, I mean right now, clearly Iran is the focal point.

We continue to hear.

Some positive commentary coming from the administration suggesting that kind of a diplomatic resolution kind of is in the cards.

Overnight we did see some strikes by the US which is kind of raised a little bit of a question kind of in terms of where we really are in that process.

Futures are still up pretty significantly.

The S&P is up about 0.7%.

Russell's up a little over 1%.

We have pulled back from the highs.

Oil prices are also pretty significantly lower, right?

So Ice Brent down about 4% from Friday's close, but we've reversed about half of the initial move.

So we got down to just about $96 a barrel.

And then the other real key to kind of markets right now is, and it's all kind of tied together is the interest rate environment and we are seeing Treasury yields moving a bit lower.

Yes, and speaking of interest rates here in the US, we had the swearing-in ceremony for new Fed chair Kevin Warsh before the holiday weekend, and of course we're keeping a close eye on the bond market yields as well as expectations for the central bank's next move.

So where do we stand right now?

Yes, look, I mean, you know, the Federal Reserve is kind of boxed in at this point, given where kind of oil prices are and with the expectation that we're going to see kind of the inflation data continue to move higher in the coming months.

If we can get across the finish line in terms of this resolution with Iran and we start to see oil prices start to pull back meaningfully, that will kind of potentially kind of set the stage for the Federal Reserve to kind of move the ball back towards a more dovish stance if we kind of get to that point and we get to see a little bit of the economic data slowing a little bit, but.

Related to the move higher in oil prices, right, so that would potentially kind of help him, you know, kind of move to kind of move the ball to where he theoretically wants to go, but in the interim, right, we're going to have to, you know, they're going to have the message that we're here to fight inflation and you know, and we stand ready to act if we need to be, if we need to, and I would expect to see kind of the language within the statement in the June meeting. that we heard Governor Waller suggest that they're going to kind of take off that easing bias from the from their statement.

And speaking of which, there are several Fed speeches this week in addition to the economic data releases as well as earnings.

But on top of that, we have several investor conferences that are taking place.

So what are you listening out for this week?

Yes, look, I mean, we continue to hear kind of corporate America be pretty kind of cautiously optimistic.

Clearly tech has been the big winner from an earnings perspective, from a market perspective, right, and we're just kind of seeing this insatiable demand kind of coming from that AI spending.

You know, even the even the kind of the retailers were reasonably positive last week, right?

They are suggesting that we're starting to see kind of the impact of higher gas prices and kind of the cumulative effects of inflation starting to hurt the starting to hurt the consumer.

Right, but you know there's still this resilience, you know, I would imagine that if we kind of once again if we can get through kind of Iran and we see oil prices start to move lower, right, the guidance gap that we've seen where companies are beating expectations but not raising guidance, right, that will start to narrow and you'll actually start to see some positive, some more positive revisions kind of on the earning side of things if we can kind of get past this Iran hurdle.

And finally, before I let you go, I do want to ask you about key levels you're watching this week.

So tell us why you're watching these levels.

Yes, look, I mean, you know, with the S&P 500 kind of hovering kind of just around 7500, right, and new all-time highs, you know, that's kind of the first level we're paying attention to.

And then, you know, any sort of pullback into kind of that 20 day moving average.

But you know, but I really think kind of in terms of Key levels, I'd really be watching oil and yields, right?

And so you have kind of the 10 year is kind of trading just back below 4.5%, right?

That's been kind of the level where markets have gotten a little kind of a little more concerned as we've kind of moved through 4.5% on the 10 year, right?

And then Ice Brent breaking back below $100 a barrel, right?

It's sitting just below its 50 day moving average.

Right now, which is kind of right 9975, right, so if we can get some downside, you know, kind of some more downside momentum here, you know, those would both kind of feed positively into equity and as you mentioned, we are paying close attention to all of those levels here in the US.

It is summer driving season, so I'm sure plenty of Americans are keeping an eye on the price at the pump.

Thank you so much for joining us, Michael.

Thanks for having me.

Thank you.