In 30 seconds: The S&P 500 hit record highs with nine consecutive weekly gains, driven by an unprecedented 24% earnings growth surge fueled by big tech and AI, while memory-chip ETF DRAM became the fastest ever to surpass $10B in AUM. May ISM and S&P Global Manufacturing PMIs surged to multi-year highs, with strong new orders and production, though employment remained contractionary and purchasing manager sentiment stayed broadly negative despite the headline strength. Crude oil prices spiked ~$3.50 per barrel after Iran halted communications following Israeli strikes in Lebanon, while the US continued heavy SPR releases and Goldman Sachs data showed Chinese gasoline retail sales falling 20% year-on-year amid a shift to EVs and mass transit. US data center construction hit a record pace of nearly $51B/year—up 268% since ChatGPT's launch—while office construction collapsed 60% from pre-pandemic levels, underscoring a dramatic AI-driven reallocation of capital investment.
The S&P 500 closed at 7,599.96, up 0.26% on the day, just shy of crossing 7,600 for the first time. A year ago the index sat near 5,900. 5 years ago it was 4,200. 10 years ago, 2,100. The compounding is relentless, and the fuel this time is earnings: S&P 500 profit growth is running at 24% year over year, a pace never seen this high outside of post-recessionary rebounds. It is an unprecedented boom fueled by massive EPS gains in big tech. Whether you find that reassuring or circular depends on how you feel about a market that has decided the future is one long earnings beat. The memory-chip trade has become its own spectacle. Micron Technology's market cap surpassed $1 trillion last week, rising more than 10x over the last year. The Roundhill Memory ETF ($DRAM) launched on April 2 and already sits at nearly $14 billion in assets, making it the fastest ETF in history to cross above $10 billion. Since launch it has more than doubled, against 15% for $SPY over the same window. NVDA consistently traded more premium than SPY and QQQ combined. Software is joining the party too, with Software ETF ($IGV) up 15% since last Wednesday's close. Meanwhile the Russell 2000 slipped 0.47% to 2,905.76, and within that index non-profitable Russell 2000 stocks are outperforming profitable ones YTD. So the speculative stuff is working and the profitable stuff is lagging. A perfectly normal market where everything makes sense.
The May ISM Manufacturing PMI came in at 54.0, a four-year high, beating the consensus estimate of 53.0 and the prior month's 52.7. That is a 1.3 point month-over-month gain. The S&P Global U.S. Manufacturing PMI final print came in at 55.1 for May, the highest monthly reading since May 2022, and marked the tenth consecutive month above 50. S&P Global U.S. Manufacturing PMI final print: 55.1. Under the hood, the demand side looks genuinely strong. New orders surged to 56.8, up 2.7 points from the prior 54.1. Production rose to 54.3, up 0.9 points. Backlogs climbed to 52.2, adding 0.8 points. The strength is concentrated mainly in computers/electronics, aerospace, and electrical equipment and appliances. If you make chips, aerospace components, or appliances, business is good. The employment sub-index, however, stayed contractionary at 48.6. That is up 2.2 points from the prior 46.4, so the contraction is less severe, but the employment sub-index remains below 50. ISM Inflation (Prices Paid) down 2.5 points month-over-month. The catch is that orders and production are expanding while purchasing manager sentiment remains downbeat — 69% of comments negative versus just 25% positive. One explanation for the disconnect: inventory building has been an important driver of recent manufacturing activity. Inventory building has been an important driver of manufacturing activity of late; in May, fewer purchasing managers report their level of inventories as 'too low,' so less inventory building is expected in the back half of 2025. If the inventory restocking impulse fades, the headline number may have a harder time holding these levels.
Crude oil spiked roughly $3.50 per barrel after Iran apparently halted message exchange following Israel's attacks in Lebanon. When a country with meaningful oil export capacity goes quiet on diplomatic channels, the market does the only thing it knows how to do, which is price in the worst case immediately and ask questions later. Oil is still mostly priced in USD, and there is roughly $13-14tn in foreign USD-denominated debt outstanding globally. The argument, stated bluntly, is that anytime either USD or oil get 'too high', foreigners will sell USTs aggressively. This is not an opinion, it is an accounting identity. Crude oil price up ~$3.50 per barrel following Israel's attacks in Lebanon. Meanwhile, the US continues to drain its strategic cushion at a remarkable clip. Last week's release came in at ~8 million barrels, a pace of ~1.1 million barrels per day. That is actually a slight deceleration from prior weeks, which saw draws of 8.6m; 9.9m; and 9.1m barrels respectively. At the current pace of releases, the SPR will drop below the Biden low by late next week. You might reasonably ask whether emptying the strategic reserve into a geopolitical environment where Iran is going radio-silent constitutes good planning. SPR release last week: ~1.1 million barrels per day. Estimates put gasoline retail sales in China down a hefty 20% year-over-year in April, explained by a shift toward mass transport and EV among other factors. It is the kind of number that, if it persists, reshapes long-term demand models for China. Gold: $4,513.30.
US data center construction is running at roughly $51B/yr, a record in the official data. That figure is up 28% over the last year and, more strikingly, up 268% since the launch of ChatGPT. If you wanted a single number to capture the speed at which a general-purpose technology thesis converts into poured concrete and humming transformers, 268 percent since the launch of ChatGPT is a reasonable candidate. Zoom out a bit and the broader envelope is even larger. Total computer and data center investment across the US economy is now running at $450B/yr, a figure that bundles the servers going inside those buildings with the buildings themselves. US data center construction: $51B/yr. Meanwhile, the asset class that data centers are spiritually replacing continues to shrink. US office construction, adjusted for inflation, has fallen 60% since 2020, with another 9% decline over the last year alone. The pitch from US tech companies remains that AI will be revolutionary for productivity but will not hurt white collar jobs. You can hold both ideas in your head at once, but the capital allocation pattern suggests the market is placing a very large, very concrete bet on the first half of that sentence and politely ignoring the second.
Here is what your weekly spend looks like right now.
Gas (per gallon): $4.47, down 0.33% on the week
Groceries (CPI food at home): 345.20, up 0.49% on the month
Average hourly earnings: $37.41, up 0.16% on the month