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MANHATTAN (CN) — Investors were lured into buying equities this week, as promises from President Trump of a peace deal with Iran caused oil prices to drop and equities to rise.
Investors initially welcomed signs that a peace deal with Iran might be within reach, especially after President Trump on Thursday backed off threats to strike Iran “very hard” or invade Kharg Island. Continued uncertainty on Friday did little to dampen that optimism.
Markets stumbled earlier in the week but rebounded after reports of a possible peace deal emerged. By Friday’s close, the Dow Jones Industrial Average was up 336 points for the week, while the S&P 500 gained 48 points and the Nasdaq added 179.
News of the potential agreement, and its impact on oil prices, with Brent crude falling to about $86 per barrel, dominated headlines and largely overshadowed two reports showing inflation continued to rise.
The producer price index, released Thursday, showed prices rose 1.1% from the previous month, pushing annual producer inflation to 6.5%. Both figures came in well above economists’ expectations.
Earlier in the week, the Bureau of Labor Statistics reported that the consumer price index rose 0.4% in May, matching forecasts and driven largely by a 40% year-over-year increase in gasoline prices.
Still, economists found some encouraging signs in the CPI. Core prices, excluding food and energy, edged down 0.1%, and analysts expect lower energy costs to help ease inflation in next month’s CPI reading.
“Gasoline prices are down so far in June from May, which should help the next CPI report if sustained,” said Bill Adams, chief U.S. economist at Fifth Third Commercial Bank. “The effect of tariffs on the CPI is similarly a one-off shock, which may have already peaked.”
Wall Street also shrugged off a fresh round of surveys showing declining confidence among consumers and small businesses.
The National Federation of Independent Business reported another drop in small-business optimism, with its index remaining below its 52-year average of 98. The trade group’s “uncertainty index” climbed to 91, well above its historical average of 68.
Artificial intelligence remains a major challenge for small businesses, which are generally less equipped than larger firms to absorb recent cost shocks or capitalize on AI-driven efficiencies.
“Despite the enthusiasm around AI, the overall picture is divided,” NFIC Chief Economist Bill Dunkelberg said in a statement. “More small business owners are struggling with significant and unpredictable hikes in fuel prices, which are more challenging for small businesses to pass on to their customers compared with larger corporate competitors.”
The May survey found supply chain disruptions have increased from April, now affecting 70% of small businesses, and inflation is the single-biggest problem for 18% of owners, the highest reading since the end of 2024.
Other reports about sentiment released this week continue to paint a negative picture. On Monday, the Federal Reserve Bank of New York also found in its May survey of consumer expectations that inflation expectations remain high and that nearly half of all Americans think their financial situation is worse now than a year ago.
The share of respondents saying this is the highest share since January 2023, the Federal Reserve bank reported, and the number of respondents who expect their finances to improve in 2027 fell to the lowest level since October 2022.
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