Stock Market Updates: S&P 500 Gains Amid Easing Inflation Pressures
The S&P 500 Index ($SPX) (SPY) closed up +0.72% on Tuesday, while the Dow Jones Industrials Index ($DOWI) (DIA) fell -0.64%. The Nasdaq 100 Index ($IUXX) (QQQ) rose by +1.58%. June E-mini S&P futures (ESM25) increased by +0.64%, and June E-mini Nasdaq futures (NQM25) were up +1.48%.
Market Recovery Driven by Inflation Data and Trade Tensions
On Tuesday, stock indexes rebounded from early losses, continuing Monday’s rally. The S&P 500 achieved a 2-1/4 month high, while the Nasdaq 100 reached a 2-1/2 month high. This uptrend was fueled by easing inflation as the US April consumer price report showed a smaller-than-expected increase. Furthermore, market sentiment benefited from the recent agreement between the US and China to cut tariffs and reduce trade tensions.
Chipmakers also contributed to the market’s positive momentum on Tuesday. Nvidia and Advanced Micro Devices announced they would supply semiconductors to the Saudi Arabian artificial intelligence firm Humain for a data center project. Additionally, the US Commerce Department noted it would rescind a rule on AI diffusion initiated by President Biden, signaling a potential overhaul of semiconductor export regulations set under the Trump administration.
April CPI and Economic Outlook
The year-on-year Consumer Price Index (CPI) rose +2.3% in April, slightly below the expected +2.4%, marking the lowest annual increase in four years. Excluding food and energy, the CPI rose +2.8%, matching forecasts and remaining steady since March.
A decrease in US-China trade tensions has alleviated some recession fears. JPMorgan Chase increased its US GDP forecast for 2025 from +0.2% to +0.6%, citing that the ongoing trade truce reduces recession risk to below 50%.
Difficulties for Health Insurance Stocks
Despite the overall market gains, health insurance stocks weighed down the Dow Jones Industrials. UnitedHealth Group dropped over -17% following the immediate resignation of CEO Witty for personal reasons. The company also suspended its 2025 outlook due to higher-than-expected medical expenditures.
Trade Talks and Upcoming Economic Reports
Negative comments from Treasury Secretary Bessent about EU trade negotiations fueled bearish sentiment in the market. He indicated that trade discussions with Europe might progress slowly.
This week, the focus will be on tariff developments and potential trade agreements. Economic reports anticipated on Thursday include April retail sales, projected at +0.1% month-over-month, and +0.3% when excluding autos. The April Producer Price Index (PPI) is expected to show an increase of +0.2% month-over-month and +2.5% year-over-year. Manufacturing production is forecasted to decline by -0.4% month-over-month, while April housing starts are expected to rise +3.1% month-over-month to 1.365 million.
Interest Rates and Market Reactions
The bond market also saw shifts on Tuesday, with June 10-year T-notes (ZNM25) closing down -6 ticks as yields climbed. The 10-year T-note yield rose +2.8 basis points to 4.499%, influenced by a sell-off in European government bonds. The initial bond market rally was prompted by soft inflation news.
European bond yields rose, with the 10-year German bund yield reaching a one-month high of 2.680%, while the UK gilt yield saw a similar increase to 4.675%. Additionally, the German May ZEW survey expectations for economic growth surpassed forecasts, climbing to 25.2 against an expectation of 11.3.
Stock Market Movers
Chip stocks maintained their upward trend, contributing to market gains. Nvidia (NVDA) and Micron Technology (MU) rose over +5%, and other key players like Advanced Micro Devices (AMD) and Broadcom (AVGO) also saw increases. Notably, ON Holding (ONON) reported Q1 net sales of CHF726.6 million, exceeding expectations.
Coinbase Global (COIN) surged over +23% after it was announced the company would join the S&P 500 Index on May 19. Super Micro Computer (SMCI) increased by over +15% following a favorable coverage initiation. Conversely, UnitedHealth Group’s sharp decline reflects the market’s reaction to company-specific challenges.
Outlook on Earnings
As the Q1 earnings reporting season approaches its end, over 75% of S&P 500 companies have reported. Of these, 77% surpassed estimates—the highest performance since Q2 2024. Earnings growth for Q1 stands at +13.1%, notably higher than the anticipated +6.6%. However, the full-year 2025 profit forecast for the S&P 500 has been revised down to +9.4% from +12.5% in early January.
International markets also experienced gains on Tuesday, with the Euro Stoxx 50 up +0.44%, the Shanghai Composite climbing +0.17%, and Japan’s Nikkei 225 rallying to a +1.43% increase.
Earnings Reports (5/14/2025): Cisco Systems Inc (CSCO), DXC Technology Co (DXC), Dynatrace Inc (DT), Millrose Properties Inc (MRP), New Fortress Energy Inc (NFE), STERIS PLC (STE).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
