The market ended on an optimistic note this week due to a newly proposed peace agreement between the United States and Iran. However, there are still multiple economic headwinds in the market, including inflation and rate hike risks, which have made investors cautiously optimistic. Some of the top market movers this week included utilities and telecommunications stocks, while major tech giants underperformed.
Here are five major developments to keep on your radar.
1. Further Wave of Tech Layoffs
AI-driven tech layoffs have remained dominant during the first half of 2026.
Meta Platforms recently announced that it plans to eliminate 8,000 employees.1 This is part of a broader trend among many tech companies as they increasingly implement AI. AI-driven job cuts currently account for around 17% of total layoffs in 2026, according to Challenger, Gray & Christmas.2
While April’s Jobs data was encouraging, there are still many weak areas in the labor market.3
Areas like manufacturing and federal employment have experienced strong declines in employees since the beginning of the year. Further layoffs in tech and other traditional industries like manufacturing may result in more unfavorable Job reports in the upcoming months.
2. Weak Consumer Sentiment and Walmart’s New Guidance
Consumers are beginning to feel more pressure from tightening economic conditions, and this trend will likely increase as inflation continues to take a toll on the economy.
Retail sales growth during the first four months of this year has been encouraging.4 However, some leading retail companies are beginning to lower their guidance amid recent economic and geopolitical tensions.
One of the best companies to monitor to track retail sentiment in the United States is Walmart, as demand for its products generally remains more consistent during slower and/or inflationary cycles. However, shares of Walmart fell by 8.7% this week amid its weakened guidance and warnings that it may need to raise prices due to rising fuel prices.5 Even cautious picks like Walmart seem vulnerable as the risks of long-term inflation and stagnation heat up.
3. Positive US-Iran Sentiment Supports End-of-Week Performance
The market began to rally during the second half of the week following optimism about peace talks between the United States and Iran. However, Iran has criticized the United States’ excessive demands, and the United States has not finalized any agreement.6
Oil prices fell slightly on this news, and crude oil is currently below $100/barrel. Equity markets performed better on Thursday and Friday due to this news, and could experience pullbacks next week if there are any setbacks with this deal.
4. EU Growth and Inflation Forecast
A common risk among global markets is the potential for slower growth and an uptick in inflation. The risk of a stagflationary environment during 2027 is also in the cards.
The European Union recently released new economic forecast data, which calls for weaker growth and a new rise in inflation.
It is crucial to note that these current projections are still very moderate, as inflation rose much higher in 2022 due to tensions between Russia and Ukraine. H2 2026 could bring much gloomier projections if tensions in the Middle East continue.
5. Utilities Stocks Deliver Stellar Gains
Utilities stocks surprised the market this week, significantly outpacing other defensive themes like consumer defensive stocks.
According to data from Morningstar, utilities stocks drastically outperformed the broader US market and consumer defensive stocks, too.
These stocks outperformed leading tech giants like Meta Platforms, Netflix, Nvidia Corporation, and Microsoft. This signals that the market may be looking for more cautious alternatives as optimism for Mag7 stocks fades.
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