**Market Wrap – Thursday, May 28, 2026** • U.S. Treasury yields fell sharply, with the 2-year yield down 12 bp (-2.91%) to 4.01% (z = -2.59σ), indicating increased demand for safe haven assets. • Aluminum prices plummeted by 12.53% (z = -10.59σ), reflecting concerns over industrial demand and potential overproduction. • U.S. stocks experienced modest gains, with the Nasdaq up 0.91% led by robust performance from mega-cap tech stocks like Microsoft (+3.47%). **Recommendations** • Consider duration longs in U.S. Treasuries — short yields are declining, indicating a potential pivot towards safer bonds. • Monitor cyclical commodities closely — aluminum's sharp drop may signal a need to reassess industrial exposure. • Favor tech equities — positive sentiment on earnings can sustain momentum, particularly in AI-related sectors. The session was characterized by mixed signals in market performance, driven largely by bearish trends in U.S. Treasury yields and a sharp decline in industrial metals, particularly aluminum. The aluminum market's plunge, attributed to fears of oversupply and waning industrial demand, painted a cautious backdrop for equities. Despite these challenges, equity markets saw upside, with the Nasdaq Composite gaining 0.91%, buoyed by strong performances in major technology stocks, notably Microsoft, which surged 3.47% following uplifting earnings sentiment. Today's economic releases featured the Core PCE Price Index, which aligned with expectations at 0.3%, and the preliminary GDP growth rate, posting a robust 1.6%, exceeding the previous quarter's 0.7%. This data supports the Fed’s inflation narrative and may reinforce current rate expectations, as reflected in the Fed Funds futures which continue to imply a trajectory towards maintenance of the 3.50-3.75% target range in the coming months. However, the mixed signal of elevated growth alongside the potential for inflationary pressure could lead to uncertainty in future policy direction. In the bond market, the 2-year Treasury yield fell sharply by 12 bp to 4.01%, reflecting a z-score of -2.59σ, indicating unusual market activity due to flight-to-quality amidst uncertain economic conditions. Concurrently, the broader treasury yield curve also sees a downward shift, with the 10-year yield dropping to 4.50%. This movement may suggest that investors are pricing in slower growth or reconsidering the previously hawkish Fed narrative. Meanwhile, credit spreads remained relatively stable, with slight declines in corporate yields, suggesting a cautious risk appetite among investors. In equity markets, notable movements were seen across various sectors. The health care sector rose by 1.40%, potentially driven by defensive positioning amid economic uncertainties. However, the energy sector lagged, falling 1.66%, likely reflecting ongoing volatility in crude oil prices, reflecting concerns over geopolitical tensions coupled with fluctuating demand. Such sector rotations indicate a risk-on sentiment among investors despite broader economic concerns, hinting at continued interest in growth-focused segments. In the commodity space, natural gas outperformed with a notable increase of 7.93%. In contrast, aluminum's catastrophic drop of 12.53% echoes the broader industrial malaise, tied to fears of weak demand across global markets. This stark divergence in commodity performances reflects nuanced market sentiment, especially considering the bullish trends in energy contrasting sharply with bearish signals in industrial metals. The liquidity regime signal reflects deteriorating conditions, with a current reading of +0.231 but negative momentum trends indicating tightening market conditions. The accelerated deterioration in liquidity is underscored by a significant reduction in overnight reverse repo usage, which decreased by 37.24%. This trend could signal investors' growing concerns over liquidity tightening in the financial landscape, impacting risk assets' performance. Polymarket predictions suggest a high probability of ongoing market volatility with 78% odds that CME futures will track closely with Fed actions in the upcoming months, emphasizing that economic indicators will likely keep trader sentiment cautious. Upcoming economic releases, including core durable goods orders and preliminary Chicago PMI data, are significant potential catalysts for market moves, setting the stage for another data-driven digest next week. Overall, while the tone remains cautiously optimistic in equity markets amid a mixed economic landscape, the sharp declines in key industrial commodities and changes in bond yields suggest a need for vigilance as investors navigate the complex interplay between growth and inflation expectations.