In 30 seconds: A wave of May US economic data showed mixed signals, with consumer confidence slightly below prior levels, housing prices still deeply unaffordable, manufacturing activity recovering modestly, and concurrent GDP growth and inflation both running near 4%. The US-Iran military conflict has kept the Strait of Hormuz closed for roughly 90 days, prompting record US SPR releases as a price-control measure, disrupting global LNG and oil markets, while US-Iran ceasefire negotiations remain in flux. US equity markets saw the S&P 500 equal-weight index break to new highs and options markets pricing a 56% chance of touching 8,250 by year-end, even as breadth remains thin and consumer discretionary relative performance hits post-GFC lows. BP fired Chairman Albert Manifold over serious governance and conduct concerns, marking the company's fourth CEO and third chair change in six years, sending BP shares down 5%.
The Consumer Confidence Index came in at 93.1 in May, edging past the 92.0 estimate but slipping from a prior reading revised up to 93.8. The present situation sub-index printed 121.2, while the expectations component landed at 74.4, up 1 point. Employment expectations continue to run below normal. On housing, the S&P Cotality Case-Shiller 20-City Home Price Index rose 0.83% year-over-year in March, with the national index up 0.67%. Buyers' share of income allocated to housing costs: 42%. That is still extremely unaffordable, but better than in late 2023. Progress, technically. The kind of progress where you are still drowning but in slightly shallower water. Manufacturing offered a modest surprise. The Dallas Fed Manufacturing Index printed 0.4 in May, just above the 0.0 estimate. Beneath the headline, new orders hit 6.4, production 9.4, and shipments 7.4. Employment barely registered at 0.2, while wages printed 23.6. The Philadelphia Fed Services Index posted 23.6, though new orders there were a limp 0.8 and prices paid ran hot at 36.5. Zoom out and the macro picture is genuinely strange. Growth and inflation are both running with 4% handles, which is not a contradiction. It is just an uncomfortable one.
The US-Iran military conflict is now approaching 90 days, with Washington and Tehran still working toward a resolution. Donald Trump will convene his full cabinet at Camp David on Wednesday as Washington and Tehran discuss a memorandum to end the standoff. Whether that produces anything beyond a memorandum is another question. The reported terms include a ceasefire, an end to the US blockade, unfreezing of frozen funds, and some sanctions relief, with virtually no nuclear concessions in exchange. Last week the government released 9.1 million barrels — just shy of the 9.9 million barrels released the previous week — at a rate of roughly 1.3 million barrels per day. That volatility is corrosive to long-term planning — it's hard to commit capex with a 10+ year payback when oil prices can drop 10-20% on a single X post. The disruption reaches beyond crude oil — Europe's gas storage deficit has widened as traders deferred refilling while waiting for a quick resumption of exports through the Strait of Hormuz. Natural gas futures closed at $3.01, up 3.6464% on the day. Inside Iran, the conflict's domestic toll is visible in a different metric: the country is only now ending an 88-day nationwide internet blackout.
S&P 500 up 0.61% on the day. The headline number looks healthy enough, but the internals tell a more complicated story. Start with the good news. Six out of 11 S&P 500 sectors are outperforming year to date — a sign that it isn't 'just tech' going up. The S&P 500 Equal Weight index $RSP experienced a very notable breakout to new highs heading into Memorial Day weekend, and a separate reading confirmed that $SPX Equal-weight printed a fresh high. Now the asterisk. Only 12.9% of issues within the equal-weight index were at 20-day highs. A new high on a lagging, broad index sounds like confirmation. A new high where barely one in eight constituents is leading is a thin foundation. The oscillator work is equally disorienting. The S&P 500's daily overbought/oversold readings have traced what one analyst called an absolutely crazy pattern. Just six trading days separate a month-long streak of oversold closes from a month-plus streak of overbought closes. Markets do not usually flip polarity that fast. Then there is the sector rot underneath. The equal-weighted consumer discretionary index to S&P 500 ratio has now fallen below the lows seen during the global financial crisis. The index is making highs. Both of these facts are true at the same time.
There is a version of corporate governance where the board quietly replaces a leader, issues a terse press release, and everyone moves on. BP stock down 5%. What makes the dismissal particularly jarring is that Albert Manifold was widely regarded as the architect of the company's most recent turnaround. You do not usually fire the person credited with saving the company unless the governance concerns are quite serious indeed. The numbers here tell their own story. One CEO was fired for 'serious misconduct'. At some point the pattern stops being about individual failings and starts being about the institution itself, the culture that produces these outcomes with metronomic regularity. You fire your chairman for governance failures. Fine. But who was governing the governance?
Here is where the labor market stands for your paycheck.
Initial jobless claims: 209,000, down 1.42% on the week
Continuing claims: 1,782,000, up 0.34% on the week
Job openings (JOLTS): 6,866.00, down 0.81% on the month
Quits rate: 2.00, up 5.26% on the month
Unemployment rate: 4.30, flat 0.00% on the month