Market Recap - Tariff Talk And Profit Taking Keeps Market In Check

The stock market had a losing week this week, but not by much.

The difference was Friday’s session, which culminated with modest, but broad-based losses linked ostensibly to inflation concerns driven by tariff actions.

This week featured a string of tariff letters to trading partners indicating that they will be facing higher tariffs starting August 1 if they cannot work out better trade terms for the U.S. That included Japan and South Korea, which face a 25% tariff rate.

The market managed to hold up fine amid the threat of higher tariff rates, largely because most of the countries receiving the letters were not consequential trading partners, other than Japan and South Korea.

That changed late in the week, with Brazil getting a tariff letter announcing a 50% tariff rate, and then Canada getting one that sets a 35% tariff rate on imported goods not covered by the USMCA. For good measure, it was reported that the EU will be getting a letter; and President Trump declared that most trading partners will see a tariff rate of 15% to 20%, which is higher than the current 10% baseline tariff.

All things considered, the indices held up relatively well, as market participants embraced the notion that the tariff letters were being used as a negotiating leverage, cognizant that there is still time to work out less onerous terms.

Nonetheless, the tariff overhang, which also featured a 50% tariff on copper imports starting August 1 and the threat of a potential 200% tariff on pharmaceutical imports, dulled some of the market’s bullish enthusiasm.

That enthusiasm was not entirely diminished, however. The S&P 500 and Nasdaq Composite climbed to new record highs this week, aided by a better-than-expected Q2 earnings report and reassuring outlook from Delta Air Lines and AI giant NVIDIA surpassing a $4 trillion market capitalization.

The mega-cap stocks, as a class, showed resolve, which was an underpinning factor for the stock market.

The week, at times, featured some favoritism of small-cap and mid-cap stocks, but that favoritism unraveled on Friday, sending the Russell 2000 and S&P Midcap 400 Index to losses for the week.

In terms of the S&P 500, its best-performing sectors were energy (+2.5%), utilities (+0.8%), industrials (+0.6%), information technology (+0.2%), and consumer discretionary (+0.1%). The biggest laggards were the financials (-1.9%), consumer staples (-1.8%), and communication services (-1.2%) sectors.

The Treasury market, for its part, had a similar showing. It traded with a resilient tone through most of the week, which included $119 billion in new supply, but came under selling pressure on Friday in a curve-steepening trade led by losses in the inflation-sensitive back end of the curve. The 2-yr note settled the week at 3.91%, while the 10-yr note yield settled at 4.41%.

Some of Friday’s selling was linked to ruminations that the push for higher tariff rates starting August 1 could leave the Fed in a sticky wait-and-see mode that forestalls a rate cut.

The U.S. Dollar Index seemed to reflect that view, having increased 0.7% this week to 97.87.

• Nasdaq Composite: -0.1% for the week / +6.6% YTD

• S&P 500: -0.3% for the week / +6.4% YTD

• Russell 2000: -0.5% for the week / +0.2% YTD

• S&P Midcap 400: -0.6% for the week / +1.6% YTD

• DJIA: -1.0% for the week / +4.3% YTD

Market Recap - One Big, Beautiful Week For The Stock Market

With Independence Day right around the corner, the "One Big, Beautiful Bill," having passed a key procedural vote in the House after the Senate approved its version of the bill earlier in the week, looks destined to be signed into law by President Trump on July 4.

That will put an end to the negotiating phase in Congress but not necessarily to the debate phase. Market participants (and the economy) will be digesting the implications of the bill for some time, but it is fair to say that neither the stock market nor the Treasury market are living in fear of deficit forecasts.

The fact of the matter today is that the S&P 500 and Nasdaq Composite are at record highs and the 10-yr note yield, at 4.35%, is 23 basis points lower from where it started the year. The CBO, for one, forecasts the bill will add $3.3 trillion to the deficit over the next decade. 

Treasury yields did go up this week. The 2-yr note yield increased 14 basis points to 3.88%, and the 10-yr note yield added six basis points to 4.35%. The bulk of those moves followed a better-than-expected employment report for June. That report was released before Thursday's open, and it featured a drop in the unemployment rate to 4.1% from 4.2% and a relatively solid 147,000 increase in nonfarm payrolls. Granted nonfarm private payrolls were up just 74,000, which falls to the softer side of things, along with the dip in the average workweek and the year-over-year pace in average hourly earnings growth. In sum, the June employment report could have been better, but it was not rate-cut bad.

The fed funds futures market subtracted the bulk of its budding expectations for a July rate cut following the report. According to the CME FedWatch Tool, the probability of a 25-basis point cut at the July FOMC meeting sits at just 4.7% now versus 23.8% the day before the report.

The employment report was the headliner for a busy day of economic reporting on Thursday, which wrapped up a fairly busy, albeit shortened week of trading. It also wrapped up an encouraging week of trading that included news of a trade deal with Vietnam and saw broad-based gains being led by the small-cap and mid-cap stocks, and value stocks outperform growth stocks.

To be fair, large-cap stocks and mega-cap stocks did well in their own right, too, just not as well as their smaller-sized brethren. Apple was an exception there, as it gained 6.2% this week, rallying on reports that it is considering using outside AI sources to help drive its new version of Siri. 

The Russell 2000 surged 3.4% this week, while the S&P Midcap 400 Index advanced 2.9%, versus a 1.7% gain for the market cap-weighted S&P 500. The equal-weighted S&P 500, for its part, jumped 2.4% as the "other 493" stocks found some rotational wind at their back to begin the third quarter.

The S&P 500 materials sector (+3.7%) topped the list of sector winners this week but it had ample company. Other outperformers included the information technology (+2.4%), financials (+2.4%), and energy (+2.1%) sectors, while the industrials sector (+1.7%) performed in line with the S&P 500. 

The only sector to lose ground was the communication services sector (-0.2%), which was pressured by a 2.0% decline in Meta Platforms after the stock rallied 53% off its April low coming into the week.

• Russell 2000: +3.4% for the week / +0.8% YTD

• S&P Midcap 400: +2.9% for the week / +2.3% YTD

• DJIA: +2.3% for the week / +5.4% YTD

• S&P 500: +1.7% for the week / +6.8% YTD

• Nasdaq: +1.6% for the week / +6.7% YTD

Market Recap - Monthly Market Commentary – July 2025

Market Update

U.S. stocks reached an all-time high in June even as geopolitical risks remained elevated.

Despite heightened tensions between Israel and Iran, weak U.S. retail sales data, and a Federal Reserve (Fed) that remained on hold, domestic stocks rallied as investors focused on strong jobs data and better than expected corporate earnings. Against this backdrop:

• Domestic small caps outpaced large caps: Small cap stocks (Russell 2000 Index) gained +5.4% and outperformed large caps (S&P 500 Index) which returned +5.1%. Smaller stocks may have outperformed on hopes of future rate cuts and easing geopolitical tension.

• Bond returns were positive as interest rates declined: Bonds (Bloomberg U.S. Aggregate Bond Index) returned +1.5% as the 10-year yield dipped from 4.41% to 4.24%. Investment grade corporate bonds gained +1.9% during June to outpace mortgage-backed securities (+1.8%) and U.S. Treasuries (+1.3%).

• Emerging markets beat non-US developed markets: Emerging markets stocks (MSCI EM Index) gained +6.0% and topped non-U.S. developed markets (MSCI EAFE Index) which returned +2.2%. Taiwan (+9.4%) outperformed due to exposure to the rising technology sector while Brazil (+7.8%) benefitted from stability in monetary policy and fiscal reforms.

Equities

U.S. equities posted gains on easing trade tension between the U.S. and China. 

Domestic stocks rallied for the second consecutive month on optimism around global trade. The S&P 500 Index has now fully recovered from a -18.8% correction earlier this year. 

• The U.S. and China agreed to a trade deal in principle: Terms of the deal provide the U.S. with access to rare earths required for key technologies while the U.S. would lift restrictions on certain U.S. goods entering China. Tariffs on Chinese goods would expand to 55% (up from 30%) while Chinese tariffs on U.S. goods would remain at 10%. The deal is pending approval from both countries. The U.S. warned in June that countries without a trade deal in place could face tariff hikes on July 9th.

• Strong demand for artificial intelligence (AI) pushed technology stocks higher: The tech sector outperformed for the third consecutive month. Semiconductor “chip” stocks led returns in June as more firms raised expectations for AI applications and cloud computing infrastructure continued to expand.

• Rising oil prices boosted the energy sector: Israeli air strikes on Iran and the potential for global supply disruptions sent oil prices higher by 9.1% in June. Further, the demand for natural gas has increased due to its potential as a power source for data centers supporting AI.

Fixed Income

Bond returns were strong as conflict in the Middle East contributed to demand. 

Treasury yields moved lower in June following the unrest in the Middle East, but it was not a dramatic decline that can often follow geopolitical events. The rising budget deficit and recent downgrade of U.S. Treasury debt could be balancing out some of the downward pressure on yields. 

• Long-term rates fell more than short-term rates: Shorter-term yields, which are highly sensitive to Fed policy, were relatively flat as the Fed continued to take a “wait and see” approach to lower rates. Longer-term yields likely declined due to increased demand for safe-haven assets due to rising geopolitical tension and slowing economic data.

Corporate bonds of all qualities posted gains: Strong fundamentals and attractive yields have supported demand for corporate debt. In the event of an economic slowdown, established firms with high credit ratings and low refinancing risk may be better positioned.

Federal Reserve

As expected, the Fed held short-term rates steady during its June policy meeting.

The Fed stated that economic activity has continued to expand at a solid pace although wide swings in exports have affected the data. During June, the unemployment rate remained low, and labor market conditions remained solid, but inflation remained somewhat elevated. 

• The Fed projected two 0.25% rate cuts this year at their June meeting: This forecast is in line with the last two policy meetings. However, there have been growing differences among FOMC participants in recent months, as seven of the 19 members forecasted zero rate cuts this year during the June meeting, up from only four in March1.

• Chair Powell said a higher inflation outlook has led to the Fed’s inactivity: The central bank is waiting for more clarity on the economic effect of the President’s tariffs before lowering interest rates. The inflationary effect of tariffs is largely dependent upon where tariff rates settle. For now, the Fed believes the economy is well-positioned to see if inflation stabilizes.

• The Fed lowered their GDP growth estimate while revising their inflation estimate higher: The Fed’s summary of economic projections released in June suggested the U.S. economy may be headed for a period of stagflation, a period of slowing growth and rising inflation. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, is expected to end 2025 at 3%, well above the Fed’s December projection (+2.5%).
  

Israel-Iran Conflict 

Conflict between Israel and Iran escalated and has raised concerns about the risk of a broader war. 

First and foremost, our thoughts go out to those affected by recent events in the Middle East. The conflict between Israel and Iran is far too complex to cover in detail here and therefore we focused on the possible market implications of recent events. 

• The Israel-Iran conflict intensified in June: Israel launched an air attack targeting nuclear weapon facilities in Iran on June 13th. The U.S. became involved on June 21st by leading air strikes targeting three Iranian nuclear facilities in an attempt to prevent Iran from developing a nuclear weapon. A ceasefire between Israel and Iran was announced on June 24th.

• Oil prices jumped 9% in June on potential supply disruptions: Iran accounts for 4% and the Middle East accounts for almost one-third of the global oil supply. If the region becomes divided, the impact to the global oil supply is uncertain. Additionally, the Strait of Hormuz supports almost 20% of the global oil supply and Iran’s proximity to the area poses the risk of transport and supply disruptions.

• Investors should prepare for uncertainty but maintain their investment discipline: Historically, geopolitical events have led to market volatility in the initial stages, but it often subsides over longer periods. Maintaining a diversified portfolio aligned with investor goals and risk tolerance has been an effective approach historically.
  

Economic Calendar

U.S. job growth slowed but remained in economic expansion territory. 

U.S. GDP data slowed somewhat but has remained resilient. Jobs continued to grow at a steady pace, the unemployment rate has shown little evidence of weakness, and although inflation edged higher, it remained near a three-year low. Also in focus is the President’s $3.3 trillion tax and spending package. A modified version of the bill passed the Senate, but it now returns to the House for another vote as both chambers must pass the same legislation. 

• Job growth exceeded expectations: nonfarm payrolls increased by +139k in May, above the forecast (+125k), but slightly below the +147k new jobs created in April (revised down from +177k). Employee wages, a closely watched inflation indicator, rose +3.9% on an annualized basis, exceeding the forecast (+3.7%).

• Retail sales declined more than anticipated: Spending declined in May by -0.9% even as consumer confidence rebounded. It was the worst decline in monthly sales since January. However, excluding auto dealerships, building materials suppliers, and gas stations, sales rose +0.4%. This positive reading, referred to as the control group, is the input in calculating GDP1.

• The Consumer Price Index (CPI) increased modestly but was in line with the forecast: Prices rose by +2.4% (annualized) in May as expected. This was a modest increase over the +2.3% rise in April but still one of the lowest prints over the past several years. Although inflation continued to register above the Fed’s 2% target, investors took some relief in the data as the impact from new tariffs appeared modest.

Market Recap - A Fitful Week With Geopolitical And Central Bank Decision Making In Play

The market had a shortened week of trading but also a fitful week of trading that revolved around headlines pertaining to the Israel-Iran conflict, central bank decisions, and economic data.

In the end, the major indices finished the week little changed, reflecting in part the indecision over the Israel-Iran situation. There was some speculation early in the week that the U.S. could get directly involved in the conflict, with President Trump demanding Iran's "unconditional surrender" and saying that his patience with Iran is wearing thin. By the end of the week, he allowed that there was still time for Iran to negotiate and that he will decide on a final course of action with respect to Iran over the course of the next two weeks.

There were several key central banks decisions this week, all of which were expected. The Bank of Japan held its key policy rate steady at 0.50%, the Federal Reserve left the target range for the fed funds rate unchanged at 4.25-4.50%, and the Bank of England stood pat with its policy rate at 4.25%.

The Fed decision was accompanied by a Summary of Economic Projections that featured an increase in the median estimate for PCE inflation, core PCE inflation, and the unemployment rate in 2025, a decrease in the median estimate for real GDP growth, and an unchanged median estimate for two rate cuts by the end of the year.

The overarching message from Fed Chair Powell at his press conference was that the Fed is going to stick by its wait-and-see stance, largely because the labor market is still in pretty good shape and because the Fed is concerned that tariffs will lead to higher prices. Fed Chair Powell, for his part, said he is expecting a meaningful increase in inflation in the coming months because of the tariffs.

The Treasury market took that inflation talk in stride, as yields across the curve settled modestly lower from the prior week's closing levels. Fed Governor Waller (FOMC) caused a stir on Friday when he said he didn't think there would be lasting tariff inflation and that the Fed, based on his view, could cut rates in July. The fed funds futures market, though, barely moved on his view, with the probability for a rate cut in July edging up to only 16.5% from 12.5% the previous day.

Sector action this week featured only three sectors finishing higher: energy (+1.1%), which followed oil prices higher, information technology (+0.9%), and financials (+0.8%). The health care sector (-2.7%) was the biggest laggard, followed by communication services (-1.7%), and materials (-1.2%). The consumer discretionary sector (-0.7%) also underperformed for the week, which included a report showing total retail sales down 0.9%, and sales excluding autos down 0.3%, in May.

• S&P 500: -0.2% for the week / +1.5% YTD

• Nasdaq: +0.2% for the week / +0.7% YTD

• DJIA: flat for the week / -0.8% YTD

• S&P 400: +0.6% for the week / -3.1% YTD

• Russell 2000: +0.4% for the week / -5.4% YTD

Market Recap - Modest Loss Masks Busy Week

This week's action in the stock market was underscored by persistent resilience to selling efforts, but ultimately the market could not avoid a lower finish with the S&P 500 losing 0.4% for the week.

The modest loss masked a week that was jam-packed with news developments, starting with some optimism surrounding trade talks between officials from the U.S. and China, followed by an encouraging CPI report for May, indications of trade deals with India, Mexico, and Canada taking shape, and ending with concerns about the impact of an escalating conflict between Israel and Iran.

Like stocks, Treasuries finished the week on a lower note, but unlike stocks, they held onto a portion of their gains from this week.

A Big Macro Week Ends On A High Note (And The S&P 500 at 6,000)

There was a lot of drama in the market this week, the most prominent of which was the reconciliation bill feud between Elon Musk and President Trump that blew up on Thursday, triggering a 14.3% decline in Tesla's stock price.

Fortunately, none of that really derailed the stock market, which enjoyed another winning week behind the leadership of the small-cap stocks and mega-cap stocks.

There were a lot of gains to go around, however, with NVIDIA and the semiconductor stocks pacing the pack. The week ended on a high note, too, as the S&P 500 reclaimed the 6,000 level in the wake of a pleasing employment report for May. It did so with Treasury yields rising sharply, suggesting perhaps that some rebalancing out of bonds and into stocks might have been providing a tailwind.

In any case, the stock market did not look overly concerned on Friday as the 10-yr note yield rose to 4.51%. The May employment report was a welcome end to a week that was filled with notable macro developments:

• OPEC+ agreed to raise production by 411,000 barrels per day in July.

• The OECD downgraded its 2025 global GDP growth forecast to 2.9% from 3.1% and its U.S. GDP growth forecast to 1.6% from 2.2%.

• President Trump said that President Xi is "very tough, and extremely hard to make a deal with." That view preceded a phone call between the two leaders, a summary of which sounded more conciliatory than combative and included an agreement to have their respective trade teams meet again soon.

• The ADP Employment Change Report for May indicated that there were only 37,000 jobs added to private-sector payrolls (Briefing.com consensus 115,000) and none for small businesses, which lost 13,000 jobs.

• The ISM Services PMI for May printed a contractionary reading (49.9%) for only the fourth time in the last 60 months.

• Elon Musk decried the one big, beautiful bill on social media and urged lawmakers to "kill the bill."

• The European Central Bank voted to cut its key interest rates by 25 basis points, as expected, and officials suggested that might be the end of the rate cuts.

• The trade deficit plunged in April to $61.6 billion (Briefing.com consensus: -$117.2 billion) from an upwardly revised deficit of $138.3 billion (from -$140.5 billion) in March. Exports were $8.3 billion more than March exports, but imports were $68.4 billion less than March imports.

• President Trump said his top trade representatives, who include Treasury Secretary Bessent, Commerce Secretary Lutnick, and U.S. Trade Representative Greer, will meet Monday in London with representatives from China in reference to the trade deal.

• The May employment report was better than feared and also, frankly, good enough to lend confidence to the idea that the U.S. economy has enough labor market footing to remain on a growth trajectory.

The communication services (+3.2%), information technology (+3.0%), and energy (+2.2%) sectors were the best-performing sectors this week. The consumer staples (-1.6%), utilities (-1.1%), and consumer discretionary (-0.6%) sectors were the only sectors that did not show a gain for the week.

• Russell 2000: +3.2% for the week / -4.4% YTD

• Nasdaq: +2.2% for the week / +1.1% YTD

• S&P Midcap 400: +1.7% for the week / -2.2% YTD

• S&P 500: +1.5% for the week / +2.0% YTD

• DJIA: +1.2% for the week / +0.5% YTD

Market Recap - Monthly Market Commentary – June 2025

Market Update

Equities posted strong returns in June as global trade tensions eased.

Global stocks posted solid gains during the month as the U.S. and China agreed to a 90-day tariff reduction. After declining to its 2025 low on April 8th, the S&P 500 Index rallied +18.9% through the end of May. Against this backdrop, risk assets performed well as U.S. job growth remained steady, and inflation continued to decline.

• U.S. stocks rebounded during the month as trade tension de-escalated: Large cap stocks (S&P 500 Index) rose +6.3% and outperformed small caps (Russell 2000 Index) which gained +5.3%. In addition to easing trade tensions, U.S. firms posted first quarter financial results and provided forward guidance that were largely more positive than expected.

• Bonds (Bloomberg U.S. Aggregate Bond Index) declined as longer-term rates rose: The widely followed bond index lost -0.70% as the 10-year U.S. Treasury yield increased from 4.17% to 4.41% (+0.24%).

• International stocks trailed U.S. stocks for the first month since November: Developed market stocks (MSCI EAFE Index) gained +4.6% and topped Emerging Markets (MSCI EM Index) which returned +4.3%. Taiwan, a 17% weight in the EM Index, gained +12.5% on trade policy optimism and sensitivity to recent strength in the U.S. technology sector.

Equities

Technology stocks were the top performing sector for the second consecutive month. 

Equity market volatility subsided in May on mostly positive trade policy developments. The S&P 500 reversed its losses from early in the year, and the index is now positive year-to-date (+1.1%). 

• Large cap technology stocks led the broader market higher: Tech-related mega cap stocks (Amazon, Alphabet, Apple, Meta, Microsoft, NVIDIA, and Tesla) rebounded and collectively returned +13.5% in May. After falling out of favor early in the year, the “Mag 7” stocks have now returned +29.5%, collectively, since the tariff pause on April 9th.

• Policy uncertainty weighed on health care stocks: The health care sector declined -5.6% and is one of the worst performing sectors in 2025 (-3.1%). UnitedHealth, the nation’s largest healthcare insurer, saw its stock drop -27% on a CEO departure and suspension of its 2025 financial guidance due to higher medical costs.

• Non-U.S. stocks continued to perform well: European stocks have returned +20.6% in 2025 as several countries focused on an economic revitalization due to policy uncertainty. German stocks (+31.3% YTD) led returns in the wake of a large economic stimulus plan. Even after its outperformance in 2025, the MSCI EAFE Index price-to-earnings ratio (16.2) remains at a deep discount to the S&P 500 (24.2)1.

Fixed Income

Bond returns were mixed as longer-term Treasury yields rose. 

The Federal Reserve held short-term rates steady in May and remained cautious due to the risks of higher unemployment and inflation. However, the 10-year Treasury yield rose +0.24% in May, which may be due to concerns around the U.S. budget deficit or easing trade tension which could result in stronger than expected economic growth.

• Longer-term rates rose more than short-term: Demand for government bonds was soft in May as Treasury auctions had low volume. This may be due to concerns about the U.S. fiscal outlook, as investors demand higher yields to compensate for rising credit risk.

• High yield (HY) bonds outperformed as investor risk appetite increased: Investors may believe the threat of tariffs to economic growth fell as HY bonds (rated BB and below) gained +1.7%. Further, HY bonds generally have lower duration than IG bonds and were therefore less sensitive to rising yields in May.

U.S. Debt Downgrade

Moody’s downgraded U.S. Treasury bonds due to a continued rise in U.S. government debt.

Moody’s is one of the primary ratings agencies that evaluates the credit worthiness of governments and corporations. On May 16th, Moody’s lowered its U.S. credit rating from Aaa to Aa1, joining Fitch Ratings and Standard and Poor’s (S&P) to downgrade U.S. debt from the top available rating (“triple A”)2. 

• Moody’s rating still represents a low default probability for the U.S.: The U.S. national debt is approaching $37 trillion and is expected to expand by nearly $2 trillion per year. Moody’s recognizes that the U.S. remains a dependable borrower but no longer believed it was worthy of the top rating.

• Fitch and S&P Global Ratings have both previously downgraded U.S. credit quality: S&P took similar action to downgrade U.S. debt in 2011, and Fitch lowered their U.S. credit rating in 2023. Each firm lowered their rating one notch below their top rating and cited similar reasons for the downgrade (fiscal challenges, a growing debt burden, and repeated debt limit standoffs).

• Stocks rebounded after prior downgrades: The S&P 500 declined -2.6% the week after the recent Moody’s downgrade. In similar fashion, stocks were negative the first week after the Fitch and S&P downgrades, but these losses ended up being short-lived. A resilient labor market, easing trade tensions, and solid quarter for corporate profits could be potential catalysts that lead stocks higher longer-term.

Tariffs 

Trade tensions eased in May as the U.S. and China agreed to lower tariffs for 90 days. 

Tariff rhetoric has driven market volatility in recent months. However, the rollback of tariffs with China and recent advancements with the European Union led to investor optimism in May. 

• The U.S. and China agreed to lower tariff levels for 90 days: The U.S. rate on Chinese imports was reduced from 145% to 30%, and Chinese levies on U.S. goods fell from 125% to 10%. The news provided hope of a potential trade deal between the #1 and #2 economies.

• Tariffs to remain in effect following court ruling: Several U.S. businesses filed petitions recently to halt tariffs. On May 28th, the U.S. Court of International Trade ruled President Trump exceeded his authority on many of the new tariffs levied on U.S. trading partners. However, the administration appealed, and a federal court temporarily reinstated tariffs the next day. The levies will remain in place while judges weigh the underlying legal justification.

• Tariffs were a source of market volatility during the first Trump administration: 2018 was a volatile period as the S&P 500 Index declined as much as -13.5% from its high and lost -4.4% for the year. However, the index rose sharply in 2019 (+31.5%) as trade deals were made and consumer spending remained steady. It is important to note tariffs are only one input into asset prices and equity markets have been resilient over longer time periods3

Economic Calendar

Consumer confidence jumped the most in four years on tariff pause. 

U.S. consumer confidence rebounded in May from a near five-year low with the improvement being broad-based across income and age ranges4. Individuals were more upbeat about the health of the labor market and business conditions, especially following the rollback of U.S.-China tariffs in mid-May. 

• New job growth exceeded expectations: +177k jobs were created in April, above the forecast (+133k), and the 12-month average (+152k). The unemployment rate was steady at 4.2%. A strong labor market could be the key to the U.S. avoiding an economic recession. A steady decline in new jobs or a rise in weekly jobless claims could be cause for concern.

• The Consumer Price Index (CPI) declined for the third consecutive month: Prices rose by +2.3% (annualized) in April, below the forecast (+2.4%) and lowest reading since February 2021. Prices declined for gasoline, groceries, and air fares. The upcoming May report will be heavily scrutinized as it is expected to capture the initial effect of new tariffs.

• The House passed the President’s new tax bill, which is now headed to the Senate: The bill would extend Trump’s first-term tax cuts, provide certain individuals with new tax relief, and incentivize small businesses to create jobs and expand operations. However, the bill is also expected to increase the U.S. debt burden, and some economists believe it has the potential to worsen economic inequality2.

Market Recap - Indices Lose Ground In Excitable Week

The major indices lost ground this week, rattled by rising long-term rates associated with deficit angst, and driven by consolidation interest after a huge run off the April 7 lows.

The week began in an excitable way, with Moody's downgrading the U.S. credit rating, and it ended in an excitable way, with President Trump noting Apple (AAPL) will face a tariff of at least 25% if the iPhones sold in the U.S. are not made in the U.S., and that he is recommending a straight 50% tariff for the EU, effective June 1, because "the trade talks are going nowhere."

Weekly Change:

• Dow Jones Industrial Average: -2.5%

• Nasdaq Composite: -2.5%

• S&P 500: -2.6%

• Russell 2000: -3.5%

• S&P Midcap 400: -3.6%

Market Recap - Trade War De-Escalation Fuels Winning Week

It was a winning week for stocks.

The S&P 500 and Dow Jones Industrial Average turned positive again for the year, sitting on a 1.3% and 0.3% gain, respectively in 2025 after this week's moves.

The market was enthused by a notable easing in the trade war with China. Both the U.S. and China agreed to a 90-day reduction in tariffs, which went into effect Wednesday. The U.S. dropped tariffs on China from 145% to 30% and China dropping tariffs on the U.S. from 125% to 10%.

The good news for the market is that the reductions were larger than expected. The less than good news for the market is that the reductions expire in 90 days if both sides can't reach a more permanent trade deal.

The market was focused on the positive takeaway, fueling an everything-rally. Moves were helped by short-covering activity and a fear of missing out on further gains.

Also, there was an emerging view that stocks were due for a period of consolidation after a big run since the April lows, but that didn't materialized in a meaningful way. The continued resilience acted as an additional upside catalyst for stocks.

The S&P 500 was down 17.8% for the year and down 21.4% from the all-time high it reached on February 19 at its April 7 low (4,835.04).

With Friday's close, the benchmark index is 23.2% higher than its April low and 3.2% below its all-time high.

Increased attention to mega caps and large-cap tech stocks had an outsized impact on the major equity indices. NVIDIA surged 16% and Apple was up 6.4% from last Friday.

On the flip side, UnitedHealth was a huge laggard, dropping 23.3%. It's one of the most influential names in the price-weighted Dow Jones Industrial Average, sinking following the news that CEO Andrew Witty is stepping down for personal reasons and that the company is suspending its 2025 outlook as it grapples with higher-than-expected medical costs.

Market participants were also weighing a big slate of economic news, including an April Consumer Price Index that lacked any tariff inflation shock, and a cool Producer Price Index report for April.

The calendar also included April reports for retail sales, and industrial production; weekly initial and continuing jobless claims; and May reports for the Philadelphia Fed Index, Empire State Manufacturing Survey, and NAHB Housing Market Index that, collectively, were mixed relative to expectations.

Treasury yields moved noticeably higher, but that didn't deter stocks. The 10-yr yield rose above 4.50% at its high this week before settling at 4.44%, which is six basis points higher than last Friday. The 2-yr yield jumped ten basis points from last week to 3.98%.

Market Recap - A Macro Focus

There wasn't a lot of change in the major indices this week, which continued in a consolidation pattern following the huge run off the April 7 lows.

A nine-session win streak for the S&P 500 was broken on Monday, serving as a precursor to a week where outsized moves were reserved for individual stocks with news, like Dow component Walt Disney, which impressed with Q1 results and better-than-expected guidance for the full year, and Alphabet, which struggled on concerns about AI challenges to its search business.

It was a huge week of earnings reporting, yet most of the market's concentration was on the macro picture that included the following highlights:

• OPEC+ agreeing to raise its production output in June by 411K barrels per day.

• The U.S. trade deficit hitting a record $140.5 billion, as imports surged in a tariff frontrunning move.

• India launching attacks on nine sites in Pakistan, and Pakistan vowing a response to those attacks.

• An indication that Treasury Secretary Bessent and U.S. Trade Representative Greer will meet China's Vice Premier He Lifeng in Switzerland this weekend with an aim of de-escalating the tariff/trade situation.

• The People's Bank of China lowering its 7-day reverse repurchase rate by 10 basis points to 1.40% and the required reserve ratio by 50 basis points to 9.00%.

• The FOMC voting to leave the target range for the fed funds rate unchanged at 4.25-4.50%, and Fed Chair Powell declaring that the Fed will be patient before making any policy moves as it needs to see more data to understand better how the new administration's policies are affecting economic activity.

• The Bank of England lowering its cash rate by 25 basis points to 4.25%, as expected.

• President Trump announcing the first trade deal with the UK, which will involve keeping the baseline 10% tariff rate; and noting that a number of other trade deals should be following soon.

• President Trump touting the reconciliation bill and suggesting one should buy stocks now.

The best-performing sectors this week were the industrials (+1.1%), consumer discretionary (+0.8%), and utilities (+0.5%) sectors. The worst-performing sectors were the health care (-4.3%), communication services (-2.4%), and consumer staples (-1.1%) sectors.

The 2-yr note yield increased four basis points on the week to 3.88%, while the 10-yr note yield added six basis points to 4.38%. The U.S. Dollar Index jumped 0.4% to 100.42, garnering some support from the market's expectations for the next rate cut getting pushed out to the July FOMC meeting.

• Dow Jones Industrial Average: -0.2% for the week / -3.0% YTD

• S&P 500: -0.5% for the week / -3.8% YTD

• S&P 400: +0.5% for the week / -5.6% YTD

• Nasdaq Composite: -0.3% for the week / -7.2% YTD

• Russell 2000: +0.1% for the week / -9.3% YTD