5/22 Weekly Summary-AI Rally Surges, Interest Rates Back to Mid-to-Late 4%
May 22, 2026 Macroeconomic Weekly Market Report
## This Week's Core Theme: "Interest Rates Back to Mid-to-Late 4%, Yet AI Still Leads the Market"
This week (May 16-22), the US market's core dynamic was a tug-of-war between "interest rate burden vs AI expectations."
- The 10-year Treasury yield rose +2.24% over 7 days and settled at 4.57% annually. Rates are rising this fast due to concerns that inflation could extend again, and uncertainty over oil prices and Middle East tensions (Iran conflict).(apnews.com)
- Nevertheless, the S&P 500 ETF (SPY) rose +0.87%, and the tech-focused QQQ rose +1.20%, maintaining levels near all-time highs. Continuing from last week, the AI and semiconductor rally, particularly expectations and earnings from Nvidia, lifted the market again.(axios.com)
- The crude oil ETF (USO), which surged +74.72% over 90 days, took a -4.70% correction over the past 7 days, as the war-driven crude oil spike took a breather.(apnews.com)
What does this mean for investors?
Rising interest rates again means "the discount rate applied to the entire market increases," which burdens the valuation (stock price level) of growth stocks. However, the current market is mostly offsetting that burden with expectations of earnings growth from AI. However, with the increased possibility of inflation and interest rate re-rises due to oil prices and war risks, it's more reasonable to view sector and stock selection along with risk management as more important than "unconditional risk assets".
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## Interest Rates and Bonds: 10-Year at Mid-4.6%, Real Rates Also Rising Steeply
### 1) This Week's Near-Term Movements Summary
- 10-Year Nominal Treasury Yield: 4.57%
- 7-day: +2.24%, 30-day: +6.28%, 90-day: +12.01%
- 10-Year Treasury Inflation-Protected Securities (TIPS/Real Yield): 2.18%
- 7-day: +9.00%, 30-day: +13.54%, 90-day: +21.11%
- 10-Year to 2-Year Spread (Term Spread): 0.49%
- 7-day: +4.26%, 90-day: -18.33% (Over the past 3 months has actually flattened somewhat)
To briefly explain the terms here:
- Nominal rate: This is the figure we often see in the news like "10-year Treasury yield 4.57%". It's the total interest rate including inflation.
- Real rate: It's the concept of "interest that investors can actually earn after accounting for inflation". You can see this from Treasury Inflation-Protected Securities (TIPS) yields.
- Term spread: It's the difference between the 10-year (long-term) rate and the 2-year (short-term) rate. A positive value means expectations for long-term growth are greater than short-term, and a negative value (inversion) is typically interpreted as a signal of recession concerns.
This week's characteristic is that real rates are rising much more steeply than nominal rates. This means, rather than simply "prices rising," the perception is strengthening that the Fed will maintain higher rates longer than expected. With the 10-year yield rising from below 4% to around 4.5% in just a few months, the market is readjusting from "rate cut hopeful mode" to "prolonged high-rate mode".(fanniemae.com)
### 2) Connection to Long-Term Structural Trends
Looking at the 5-year trend:
- The Federal Funds Rate (FFR) has fallen from 5.33% in early 2024 to 3.64% in April 2026, in a gradual easing phase (-31.7%).
- Meanwhile, the 10-year has fallen slightly to 4.32% (April 2026) from its October 2023 peak (4.8%), but has risen above 4.5% again in recent 1-3 months, making long-term rate increases a short-term theme.
- The 10-2 spread, after enduring deep inversion (-0.6% range) in 2022-23, has returned to positive in 2024-25 and is gradually exiting the recession concern phase.
In other words, structurally the direction has shifted from "elevated rates → gradual easing," but near-term, long-term rates are rising again due to surging oil prices, war, and persistent inflation.
### 3) Meaning for Investors
- Bond investors:
- When rates rise this quickly, prices of existing long-term bonds (like TLT) fall. In fact, TLT is down -2.01% over 30 days and -4.24% over 90 days.
- However, as rates rise higher, for new purchases, the interest (coupons) received going forward becomes more attractive. This is a typical pattern where "painful price adjustment" is followed by "attractive entry points".
- Stock investors:
- Rate increases burden growth stocks and high-valuation stocks more. This is because future earnings are discounted more heavily in present value.
- Nevertheless, this week, earnings visibility from AI offset this burden. This also means that only growth stocks with earnings that actually materialize will survive.
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## Dollar and Forex: DXY Shifts to Slight Strength, But Structurally in Downtrend
- Dollar Index (DXY): 99.39
- 7-day: +0.67%, 30-day: +1.10%, 90-day: +1.50%
The DXY is an index showing how strong the dollar is against major currencies (euro, yen, pound, etc.). This week, as US rates strengthened again and risk-off sentiment partially revived, the dollar showed modest strength.
However, looking at the 5-year structural trend, the DXY is in a long-term downtrend, falling about -8.45% from its December 2024 peak (108.49) to May 2026 levels of 99.3. This is due to:
- The US benchmark rate passing its peak and declining gradually,
- Other countries (especially Europe, Japan, etc.) showing gradual relative improvements in monetary policy and economic conditions
aligning with these trends.
Meaning for Investors
- When the dollar is strong, foreign demand easily flows into dollar-denominated assets (US stocks and bonds),
- but when dollar weakness continues, emerging market (EM) assets and commodities (priced in dollars) get room to breathe relatively.
Currently in short-term bounce within long-term weakness, EM ETF (VWO) barely positive at +0.77% over 90 days, while large-cap US stocks and AI themes show relatively stronger performance.
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## Stock Market: AI Earnings Bury Rate Hike Fears Once Again
### 1) Index Level Movements
- S&P 500 ETF (SPY): 745.57
- 7-day: +0.87%, 30-day: +4.83%, 90-day: +8.44%
- Nasdaq-100 ETF (QQQ): 717.41
- 7-day: +1.20%, 30-day: +9.51%, 90-day: +17.99%
- Dow Jones ETF (DIA): 506.26
- 7-day: +2.20%, 30-day: +2.38%, 90-day: +2.37%
Looking at the indices alone might seem like "a quiet week with slight gains," but in reality, it was a highly volatile flow with bond rates surging → stock adjustment → AI expectations rally again.
- In early-to-mid May, S&P 500 and Nasdaq hit successive all-time highs on AI semiconductor rally,
- but after mid-May, they faced a near-term correction due to a bond spike with surging oil prices and 30-year yields breaking 5%.(cryptorank.io)
- Mid-week, as 10-year yields fell slightly from 4.67% to 4.57% and oil prices retreated somewhat, S&P 500 and Nasdaq bounced over 1% in a single day.(apnews.com)
### 2) Nvidia Leads the Market Once Again
This week's most important stock market event was unquestionably Nvidia's earnings and guidance.
- Nvidia announced record Q1 earnings with revenue of $81.6 billion, up 85% year-over-year, significantly exceeding market expectations.(axios.com)
- Data center (server/AI infrastructure) revenue grew over 90% year-over-year, showing that "AI factory" buildout is accelerating.
- Forward guidance was also provided higher than market expectations, reinforcing the perception that AI infrastructure investment hasn't peaked yet.
Even before these earnings, the market had already priced in "Nvidia will extend the AI rally once again," with Nasdaq surging over 1% in a single day.(finlore.io)
Meaning for Investors
- The current US stock market, put simply, has a "interest rates vs AI" structure.
- When rates rise, overall valuations come under pressure,
- but Nvidia and a few mega-cap tech stocks' earnings are so strong that they keep pulling up the entire index.
- Therefore, it's hard to say "the market is healthy based on the indices alone," and you need to recognize that this is a biased rally with earnings concentrated in a few stocks.
- From individual investors' perspective:
- Even if tracking indices (e.g., SPY, QQQ), you should first check your time horizon and risk tolerance for volatility,
- and when selecting individual stocks, this is a period where you should first verify whether earnings actually materialize.
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## Commodities and Crypto: Oil Takes a Breather, Gold, Silver, Bitcoin in Correction
### 1) ETF Price Movements
- Long-Term Treasury ETF (TLT): 84.68
- 7-day: +1.22% (bounced as rates plunged early this week), 30-day: -2.01%, 90-day: -4.24%
- Gold ETF (GLD): 413.69
- 7-day: -0.86%, 30-day: -4.96%, 90-day: -11.72%
- Silver ETF (SLV): 68.26
- 7-day: -1.13%, 30-day: -2.99%, 90-day: -10.91%
- Crude Oil ETF (USO): 141.26
- 7-day: -4.70%, 30-day: +9.17%, 90-day: +74.72%
Over the past 3 months, oil prices have surged over 70% due to war (Iran-related tensions) and supply concerns, becoming a key variable in inflation and interest rate re-rise concerns.(apnews.com)
This week, oil prices adjusted -4.7% over 7 days, taking a breather, and thanks to that, interest rates and stock markets also found some short-term stability.
Conversely, gold and silver, despite their appeal as "safe assets," have fallen over 10% in 3 months. This is due to:
- Surging real rates (allowing investors to earn quite high real interest from Treasuries),
- Short-term shift to dollar strength
As a result, we can interpret this as the relative attractiveness of non-interest-bearing assets (gold, silver) declining.
### 2) Cryptocurrencies: Deep Breather in Bull Market
- Bitcoin (BTC): $75,864
- 7-day: -4.04%, 30-day: -3.00%, 90-day: +11.62%
- Ethereum (ETH): $2,069
- 7-day: -6.94%, 30-day: -12.89%, 90-day: +4.85%
While still in an uptrend on a 90-day basis, it has undergone quite deep adjustments over the past 1 month to 1 week. This is due to:
- All leveraged and high-risk assets are coming under pressure from rising rates,
- Investment capital is concentrating more in AI and big tech stocks
to summarize.
Meaning for Investors
- Oil: While near-term correction has occurred, at +74% over 90 days it's reasonable to expect its influence as an inflation variable remains significant.
- Gold, Silver: While rates are high, rather than acting as a "unconditional safe haven" like in the past, it's more realistic to expect them to serve as volatility buffers within portfolios and dollar hedges.
- Cryptocurrency: The current adjustment can be viewed as a repricing of all risk assets due to changing interest rate conditions. Unlike the past when "all risk assets rose together," you need to be especially dispassionate about volatility tolerance and investment horizon.
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## Next Week's Focus Points
1. Direction of bond yields
- The key is whether 10-year yields will push higher above 4.5% or find stability in the 4.3-4.5% range.
- If it goes higher, growth stocks and high-valuation stocks could face another round of pressure, conversely, if it stabilizes, recently beaten sectors (small-caps, some growth stocks) could be re-evaluated.
2. Oil prices and Middle East risk
- It needs to be confirmed whether the recent 1-week oil adjustment is a real trend reversal or just a breather in war-driven spike. It's directly tied to inflation and interest rate outlook.
3. "Secondary effects" after AI/Big Tech earnings
- While core AI company earnings like Nvidia have already been reported, the next step is whether capital rotates to secondary and tertiary beneficiaries (networks, data center infrastructure, software, etc.) that benefit from their investments (Capex).
4. Re-examining role of defensive assets
- How gold and long-term bonds (TLT) will function in a high-rate environment,
- Whether the dollar will continue short-term strength within structural weakness will determine how portfolio defense and diversification strategies evolve.
In summary, this is a period where "the AI rally is still strong, but the realities of interest rates, oil prices, and war risks are simultaneously growing." In the coming weeks, the most critical checkpoints will be where the ceiling for rates is and whether AI earnings translate to actual economic and capital investment.
This content is provided for informational purposes only and does not recommend investment in any specific stocks or assets.
Source: https://nextinvest.org/ko
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