The Week in Review 5/5/25
“A person hears only what they understand.” ~ Goethe
Good Morning ,
The stock market had another exciting week of gains.
The S&P 500 closed 2.9% higher than the previous Friday, logging its ninth-straight win at the end of the week. The Nasdaq Composite was 3.4% higher than the previous Friday's close and the Dow Jones Industrial Average registered a 3.0% gain.
Factors contributing to the inclination to buy…
- Optimism around the trade war situation after China suggested that it is leaving the door open for trade talks with the U.S.
- Positive responses to earnings from Microsoft, which increased 11.1% from last week, and Meta Platforms, which increased 9.1% from the previous Friday
- Momentum after S&P 500 surpassed its 50-day moving average (5,582)
- Reacting to the March Personal Income and Spending Report, which showed a nice 0.7% jump in personal spending and unchanged readings for both the PCE and core-PCE Price Indexes on a month-over-month basis, and the April Employment Situation report, which showed a 177,000 increase in nonfarm payrolls and a 4.2% unemployment rate
Apple was left out of the rally last week, dropping 1.9% following its earnings report and Amazon received a muted response to its earnings results as well, settling 0.5% higher than the previous week.
The broad advance left ten of the 11 S&P 500 sectors higher. The technology (+4.0%), communication services (+4.2%), and industrial (+4.3%) sectors were the top performers. The energy sector was alone in the red by Friday, dropping 0.7%.
There are still some headwinds in play, however... some of the economic data is weakening, keeping fear about a recession as part of the market narrative.
The April Consumer Confidence Index slumped to 86.0 (consensus 88.3) from 93.9 in March, pulled down by the lowest reading for the Expectations Index (54.4) since October 2011; meanwhile, average 12-month inflation expectations jumped to 7.0% from 6.0%, hitting their highest level since November 2022.
Market participants also digested a relatively soft initial jobless claims number, along with another contractionary reading in the ISM Manufacturing Index in April (i.e. a reading below 50%), and a Q1 GDP report that triggered some stagflation worries with real GDP down 0.3% and the GDP Price Deflator up 3.7%.
So now what?
We have reclaimed the losses we sustained since “Liberation Day”, when Trump announced his tariff tirade. What a wild ride!!It is safe to say that volatility is likely to remain alive and well in our markets!
The FOMC meets Wednesday to decide on rates… we expect them to leave rates unchanged. The markets expect 3-4 cuts this year… we are still looking for 3 cuts in 2025 of a ¼ pt.
This week 7% of the S&P 500 will report earnings, most will focus on Info Tech and Healthcare.
And lastly, Consumer Credit will be reported Wednesday giving us insight on any consumer spending weakness.
Have a wonderful week!!
Michael D. Hilger, CEP®
Managing Director
Senior Vice President, Wealth Management
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