May Charts of Interest: What's Driving This Spring's Rally

This spring’s jump in the stock market has been strong. In this month’s charts of interest, we look at the two drivers behind the strength: corporate earnings and semiconductor stocks. We then switch to inflation before ending with a look at the tightening competitive race in artificial intelligence (AI).

As a reminder, the monthly charts of interest highlights charts and tables I’ve come across that have not made their way into other AAII commentaries.

First-Quarter 2026 Earnings Have Been Good

Earnings have been a driver of this spring’s market rally. Corporations are reporting profit growth, and analysts have been upwardly revising their second-quarter and full-year 2026 earnings forecasts. First Trust Portfolios’ Robert Carey and Peter Leonteos shared this takeaway: “The S&P 500 index’s trailing 12-month price return of 30.6% [through May 8, 2026] nearly matches its [first-quarter 2026] year-over-year earnings growth rate of 27.7% as of the same date.”

The energy sector has influenced the upwardly revised full-year 2026 earnings estimates for the S&P 500, but it is not the only one. Analysts have also become more optimistic about the outlook for information technology and communication services companies. On the other hand, earnings growth expectations have fallen for the healthcare sector, per LSEG I/B/E/S.

Source: LSEG I/B/E/S. Data as of 5/15/2026.

Talk About Pushing Your Chips In

Nvidia Corp.’s (NVDA) run toward a $6 trillion market capitalization has played a role in helping the S&P 500 reach new highs, but it is not alone. Many other semiconductor stocks have also computed big gains lately. I plotted State Street SPDR S&P Semiconductor ETF (XSD) against iShares Core S&P 500 ETF (IVV). The semiconductor ETF tracks a modified equal-weighted index, which keeps Nvidia from having outsized influence on its performance. It is up significantly since the end of March.

Source: AAII.com. Data from QuoteMedia as of 5/20/2026.

Inflation Expectations Are Rising

Incoming Federal Reserve chairman Kevin Warsh is not walking into an ideal inflation environment. On Tuesday, May 19, the five-year breakeven inflation rate was 2.66% —its highest level in three years. The 10-year breakeven rate is also rising. Both reflect the inflation expectations that traders are pricing into bonds. Blame the ongoing oil shock caused by the closing of the Strait of Hormuz.

Will There Be an Interest Rate Hike Later This Year?

Given what’s happening in the bond market, at the gas pump and even with tomato prices (up 39% over the last year!), I revisited the CME FedWatch Tool. Traders are currently pricing in an approximately 60% chance of interest rates being raised by the end of this year. These odds could change significantly based on what does and does not happen with the Iran war.

Source: CME Group.

Traditional Business Forces Apply to AI Too

OpenAI, the company behind ChatGPT, is preparing to file for an initial public offering (IPO) “in the coming days or weeks,” according to The Wall Street Journal. The company will be questioned about whether it can maintain its current market share as it makes pitches to potential investors. Competitor Anthropic (the company behind Claude) has been gaining market share. Alphabet Inc.’s (GOOGL) Google Gemini has made inroads too.

The chart below from The Leuthold Group is a reminder that the still-young AI market is not immune from the traditional business forces of competition. The early entrants in technological innovation aren’t always the long-term winners.