The Week the
Market Finds Out

Event One: April CPI (Tuesday, 8:30 ET). This is the week's most consequential data point — and the most dangerous. March CPI came in at 3.3% year-over-year, up sharply from 2.4% in February, driven by a 21.2% month-over-month gasoline price surge. April energy prices remained elevated: the national average gas price hit $4.30 per gallon last week, its highest since 2022. Consensus is pricing April headline CPI above 3.5% year-over-year. The ISM Prices-Paid Index — a leading inflation signal — rose to 155.3 in April, the highest since December 2022, suggesting upside risk even to the 3.5% estimate.

A print above 3.8% reshapes everything. It forces a hawkish reassessment of Warsh's first moves as chair, removes any credible rate-cut timeline from 2026, and re-anchors the 10-year yield above 4.5%. Equity multiples at 21x forward earnings cannot survive a sustained re-rating of the risk-free rate. A print at or below 3.2% — driven by energy price retreat or shelter disinflation — would be the most bullish outcome the market can realistically hope for, and would likely launch the next leg of the rally.

Event Two: Kevin Warsh Confirmation. The full Senate is expected to vote on Warsh's nomination this week, with Jerome Powell's chair term expiring Friday May 15. If Warsh isn't confirmed before then, Powell remains in a caretaker capacity — functional, but symbolically and institutionally awkward during a week with a major inflation print. The Banking Committee advanced Warsh on a 13-11 party-line vote, the first fully partisan Fed chair committee vote in modern history. Sen. John Fetterman (D-PA) has signaled he may vote yes, giving Warsh a comfortable margin. Republicans hold 53 seats; he needs 50.

The market has priced a smooth confirmation. The risk isn't a failed confirmation — it's the precedent his confirmation sets. Warsh has declined to commit to holding post-FOMC press conferences after every meeting. He's been cautious about signaling the pace or direction of rate changes. His reform agenda — described last summer as "breaking some heads" at an institution he views as resistant to change — will face its first test when CPI prints Tuesday, potentially before he's even been formally sworn in.

Event Three: Iran MOU. The 14-point memorandum of understanding described by Axios sources on Wednesday has not been signed. Iran's foreign ministry said they were "evaluating" the U.S. proposal, which would include a moratorium on nuclear enrichment in exchange for relaxed naval restrictions. Trump has been deliberately ambiguous — calling agreement a "big assumption" while not dismissing it. Brent crude stabilized near $100 last week, pricing in partial optimism. A formal rejection over the weekend would send Brent back above $110 at the Monday open; progress would reprice it below $90. Neither scenario appears imminent — the diplomatic pace suggests a multi-week process, not a weekend resolution.

The S&P 500 at 7,399 trades at a forward P/E of 21.0x — above the 5-year average of 19.9x and the 10-year average of 18.9x. The consensus projects 21% earnings growth for full-year 2026, with the Q1 season delivering 84% beat rates and 18.2% average EPS surprises. Revenue growth is running at 11.3% year-over-year, the highest since 2022. On pure earnings momentum, the valuation is defensible.

What it is not pricing: a sustained inflation re-acceleration. March's 3.3% headline was the second consecutive upside surprise. If April confirms the trend — and the ISM Prices-Paid data says it might — the earnings growth story collides with a Fed that cannot cut, a new chair with no precedent for handling this sequence, and an oil market that has supply buffers described by JPMorgan as "eroding." The six-week win streak was built on earnings. The next leg requires inflation to cooperate.