Rates Rise as Oil Drops, With Yield Hunters Turning Focus to Fed Dissenters: May 1, 2026

Rates are rising amidst oil dropping sharply after Federal Reserve dissenters further explained why the next policy move may be a hike rather than a cut. Investors are turning their focus to the central bank and are lifting yields even as another chance at a peace deal between Tehran and Washington was announced this morning. Prospects for a truce combined with well received earnings from Magnificent 7 member Apple sent the S&P 500 and Nasdaq 100 indices to fresh record highs before those benchmarks began to fade. But a look ahead at April inflation, which is likely to hit 3.6% or 3.7%, and prediction markets pricing in a figure north of 4% for May, has fixed-income observers nervous about a shift in monetary policy just as new Chair Kevin Warsh prepares to get confirmed by the Senate around May 11. Equity traders, meanwhile, remain focused on the AI boom and are totally ignoring macroeconomic risks and heavier borrowing costs, even as domestic Big Oil CEOs warned on their quarterly calls of possible supply scares in the near future that would materially worsen the landscape. Still, an upbeat ISM manufacturing print this morning checked a box for ongoing cyclical strength in the economy, even though the data narrowly missed projections. In trading, the greenback and volatility protection instruments are steady, 8 of 11 major equity sectors are advancing on the session alongside cryptocurrencies while commodities ex precious metals are retreating.

Manufacturing Environment Stabilizes Following Strong March

US manufacturing conditions stabilized in April after March saw the strongest Institute for Supply Management’s (ISM) Purchasing Managers’ Index in 43 months. The April print repeated the preceding month’s 52.7 figure, narrowly missing the median estimate for an increase to 53. The sector benefited from strength across most categories, as new orders, production and backlogs arrived well ahead of the expansion-contraction threshold of 50 with scores of 54.1, 53.4 and 51.4 compared to the previous interval’s 53.5, 55.1 and 54.4. But inflation, exports and employment were headwinds, signaling accelerating price pressures, a weak international economy and payroll reductions. Those segments came in at 84.6, 47.9 and 46.4, worsening materially from the prior print’s 78.3, 49.9 and 48.7.

A 76% Chance of 4-Handle CPI Exists in Month Warsh Is Confirmed

Equity and fixed-income bears are poised to take a stand in the next two months, which are historically weak from a seasonal perspective. Investors are likely to turn from a glass-half full approach to a 50% empty viewpoint, as the focus turns from robust corporate earnings to inflationary pressures that are quickly spiraling out of control. And the risks of further cost forces are mounting, ladies and gentlemen, with food geared to spike meaningfully from here, joining oil as a negative factor for yields, as fertilizer expenses increase substantially and farming disruptions worsen. Meanwhile, Fed Chair nominee Kevin Warsh is in the bullpen warming up while waiting to get confirmed in a month where prediction markets are pricing in a 76% chance of a 4-handle on the May Consumer Price Index. Wall Street is positioned to test the new leader as is typical from past occurrences, against the backdrop of three hawkish dissenters who are going to want to hike soon in my opinion, and central bank independence under close watch from the financial community.

Source for image: ForecastEx

International Roundup

South Korea Exports Jump on AI Demand

South Korea’s April exports jumped in response to growing demand for artificial intelligence chips, placing the country among the ranks of China and Singapore that have recently reported similar results. The value of products that South Korea shipped abroad climbed 48% year over year (y/y), exceeding the lofty economist consensus estimate for a 45.3% gain, but slowing marginally from March’s 49.2% rate. Also in April, imports expanded by 16.7% compared to the year-ago period, a stronger print than the economists’ forecast of 14.5% and an acceleration from 13.2% in the preceding month. Despite the strong growth of foreign demand for the country’s products, South Korea’s trade balance of $23.77 billion eased slightly from March’s $26.24 billion surplus. Economists forecasted that the value of exports would exceed imports by $23 billion. The country’s semiconductor shipments to foreign markets climbed 173% y/y while demand for computer-related items and solid-state drives soared 516%. Conversely, the headwinds of the Iran war and increased production of cars in the US contributed to automobile exports sinking 5.5%, although the value of electric vehicles and hybrids were up 23% and 9%. Among countries China and the US increased their purchases of South Korean products by 63% and 64% with semiconductors driving the strength.

Australia’s Factory Gate Price Pressure Eases

Factory output prices in Australia climbed 0.4% during the first quarter and 3% y/y. The quarterly gain fell below the economist consensus estimate of 0.9% and moderated from the 0.8% ascent in the fourth quarter while the y/y metric eased from 3.5% during the previous interval. During the first quarter, prices compared to the final three months of 2025 were up 10.1% for petroleum refining and petroleum fuel manufacturing with the Strait of Hormuz driving inflation within the category. Also during the quarter, property operators experienced strong demand, which allowed them to increase prices by 1%. Post high school level education, furthermore, was up 2.2%, a result of annual tuition adjustments made in the first quarter. Air travel, however, dropped 4% following the end of the busy holiday season.