Weekly Wrap

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. The Vanguard Mega Cap Growth ETF (MGK) jumped 7.2% this week. NVIDIA (NVDA) surged 16% and Apple (AAPL) was up 6.4% from last Friday.

On the flip side, UnitedHealth (UNH) 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 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%.

Monday:

The stock market closed sharply higher across the board. The Dow Jones Industrial Average was more than 1,100 points higher than Friday's close. The S&P 500 jumped 3.3% and the Nasdaq Composite closed 4.4% higher.

Market participants were 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, effective Wednesday, with the U.S. dropping 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.

Reviewing Monday's economic data:

• The Treasury Budget for April showed a surplus of $258.4 billion compared to a surplus of $209.5 billion in the same period a year ago.
• The April deficit resulted from receipts ($850.1 billion) exceeding outlays ($591.8 billion). The Treasury Budget data are not seasonally adjusted so the April surplus cannot be compared to the March deficit of $160.5 billion.
  • The key takeaway from the report is that there was some relief on the deficit side of things with tax receipts swelling in April; however, the budget deficit at this point in the fiscal year is still 22% greater than in fiscal 2024.

Tuesday: 

It was another winning session for stocks. The S&P 500 (+0.7%) and the Nasdaq Composite (+1.6%) extended this week's gains, leading the S&P 500 to erase its 2025 losses. The index is fractionally higher this year, powered by a strong rally in mega caps and chipmakers.

NVIDIA (NVDA) was a standout in that respect, leading the S&P 500 technology sector to close 2.3% higher.

The Dow Jones Industrial Average was left out of the rally due a big loss in UnitedHealth (UNH). It's one of the most influential names in the price-weighted 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.

The upside action was also driven by a fear of missing out on further gains, momentum after the notable de-escalation in the trade war with China, and an April Consumer Price Index that lacked any tariff inflation shock. Also, it has been enthused by the news that Saudi Arabia, in conjunction with President Trump's visit there, announced a $600 billion investment plan in the U.S.

Reviewing Tuesday's economic data:

• April NFIB Small Business Optimism 95.8; Prior 97.4
• April CPI 0.2% (Briefing.com consensus 0.3%); Prior -0.1%, April Core CPI 0.2% (Briefing.com consensus 0.3%); Prior 0.1%
  • The key takeaway from the report is the absence of any tariff shock in the headlines. Consumer prices, overall, were held in check, for the most part, including food and gasoline.

Wednesday: 

The stock market settled in mixed fashion. The Dow Jones Industrial Average closed fractionally lower, the Nasdaq Composite logged a 0.7% gain, and the S&P 500 settled little changed.

The outperformance of the Nasdaq was driven by ongoing buying in mega caps, chipmakers, and growth stocks.

There was less enthusiasm for other areas of the equity market.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index 1.1%; Prior 11.0%
• Weekly EIA Crude Oil Inventories showed a build of 3.45 million barrels versus last week's draw of 1.11 million barrels

Thursday:

The stock market exhibited mixed action. The market started the session with losses at the index level, but the Dow Jones Industrial Average (+0.7%) and the S&P 500 (+0.4%) closed with gains.

There was an emerging view that stocks are due for a period of consolidation after a big run (the S&P 500 is up 6.3% in May), but that still hasn't materialized in a meaningful way. The continued resilience seen acted as its own upside catalyst as the session progressed.

The drop in market rates also contributed to the underlying positive bias.

This price action was driven in part by a cool Producer Price Index report for April (-0.5%; Briefing.com consensus 0.3%). It was just one report, though, on an economic data-heavy day.

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.

Reviewing Thursday's economic data:

• The Producer Price Index for final demand decreased 0.5% month-over month in April (Briefing.com consensus 0.3%). That was the good news. The bad news is that the prior month was revised up to unchanged from a 0.4% decline. The Producer Price Index for final demand, less foods and energy, decreased 0.4% month-over-month (Briefing.com consensus 0.3%), again good news, but the bad news (again) is that the prior month was revised up to 0.4% from -0.1%. On a year-over-year basis, the index for final demand was up 2.4%, versus an upwardly revised 3.4% (from 2.7%) in March, while the index for final demand, less foods and energy, was up 3.1%, versus an upwardly revised 4.0% (from 3.3%) in March.
  • The key takeaway from the report is that the big drop in the index for final demand was driven by a 0.7% decline in the index for final demand services (the largest decline since December 2009). Over 40% of that 0.7% decline was driven by margins for machinery and vehicle wholesaling, which dropped 6.1%. That suggests wholesalers were likely absorbing some tariff impacts, which is good for the end customer but not necessarily for earnings.
• Total retail sales increased 0.1% month-over-month in April (Briefing.com consensus 0.2%) following an upwardly revised 1.7% (from 1.4%) in March. Excluding autos, retail sales were also up 0.1% month-over-month (Briefing.com consensus 0.5%) following an upwardly revised 0.8% increase (from 0.5%) in March.
  • The key takeaway from the report is that the pace of spending on goods decelerated in April, speaking to the tariff frontrunning evident in the strong sales for March and reflecting the consumer's cautious mindset following "Liberation Day" and the stock market's volatility.
• Initial jobless claims for the week ending May 10 were unchanged at 229,000 (Briefing.com consensus 226,000), while continuing jobless claims for the week ending May 3 increased by 9,000 to 1.881 million.
  • The key takeaway from the report is that the initial jobless claims filings -- a leading indicator -- still reflect an otherwise solid labor market that will remain supportive of consumer spending, albeit perhaps at a slower pace in the face of higher prices.
• The May Empire State Manufacturing Index checked in at -9.2 (Briefing.com consensus 1.0) versus -8.1 in April. The May Philadelphia Fed Index checked in at -4.0 (Briefing.com consensus -6.0) versus -26.4 in March.
  • The key takeaway from these regional manufacturing reports is that the breakeven point between contraction and expansion is 0.0, so each reflects a contraction in activity in May versus April, somewhat faster for the Empire State report and somewhat slower for the Philadelphia Fed Index.
• Total industrial production was flat month-over-month in April (Briefing.com consensus 0.3%) following an unrevised 0.3% decline in March. The capacity utilization rate dipped to 77.7% (Briefing.com consensus 77.9%) from an unrevised 77.8% in March. Total industrial production increased 1.5% yr/yr while the capacity utilization rate was 1.9 percentage points below its long-run average.
  • The key takeaway from the report is that manufacturing output was weak. Excluding motor vehicles and parts, manufacturing output still decreased 0.3%, presumably with the tariff uncertainty holding back total output.

Friday:

The stock market closed a winning week on a high note. The Dow Jones Industrial Average (+0.8%) was more than 300 points higher than yesterday's close and turned positive for the year (+0.3%). The S&P 500 (+0.7%) and the Nasdaq Composite (+0.5%) also closed at session highs.

The session started slow, however, with major equity indices trading near, or below, the prior closing levels. The muted moves were driven in part by a consumer sentiment report for May that was low on sentiment and high on inflation expectations. Year-ahead inflation expectations increased from 6.5% to 7.3% and the headline number sank to 50.8 from 52.2.

The preliminary May report was conducted between April 22 and May 13, which was two days after the de-escalation in the trade war with China, so it may not capture any sentiment changes resulting from the notable shift on the tariff front.

Buying picked up as the session progressed, driven by ongoing momentum and a fear of missing out on further gains. The positive skew was also helped by stocks showing early resilience to selling efforts.

Reviewing Friday's economic data:

• April Housing Starts 1.361 mln (Briefing.com consensus 1.383 mln); Prior was revised to 1.339 mln from 1.324 mln, April Building Permits 1.412 mln (Briefing.com consensus 1.450 mln); Prior was revised to 1.481 mln from 1.467 mln
  • The key takeaway from the report is the weakness in single-unit permits across all regions, as it speaks to cautious-minded consumers and builders dealing with higher prices, higher mortgage rates, and higher building costs.
• April Import Prices 0.1%; Prior was revised to -0.4% from -0.1%
• April Import Prices ex-oil 0.4%; Prior was revised to -0.1% from 0.1%
• April Export Prices 0.1%; Prior was revised to 0.1% from 0.0%
• April Export Prices ex-ag. 0.1%; Prior was revised to 0.1% from -0.1%
• May Univ. of Michigan Consumer Sentiment - Prelim 50.8 (Briefing.com consensus 55.0); Prior 52.2
  • The key takeaway from the report is that it continues to reflect some deteriorating views among consumers about their personal finances and some alarming views about their inflation expectations. Note, this survey was conducted between April 22 and May 13, closing two days after the U.S.-China tariff de-escalation news, so it doesn't capture the full consideration of that pleasing news.