Stock Markets React to Mixed Economic Signals and Legislative Developments
The S&P 500 Index ($SPX) (SPY) is down -0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) has decreased by -0.11%, while the Nasdaq 100 Index ($IUXX) (QQQ) shows a modest increase of +0.20%. June E-mini S&P futures (ESM25) are down -0.03%, whereas June E-mini Nasdaq futures (NQM25) have risen by +0.18%.
Market Overview and Reactions
Today’s trading shows a mixed performance among stock indexes. The S&P 500 and Dow Jones Industrials have dipped to 1.5-week lows. Initial declines were linked to a rise in bond yields following the House’s passage of President Trump’s tax and spending bill. The 10-year T-note yield reached a 3.25-month high of 4.625%. However, yields later stabilized, contributing to a recovery in stocks, driven in part by Fed Governor Waller’s dovish remarks. He suggested that if the Trump administration’s tariffs level off at about 10% this summer, it could set the stage for potential rate cuts in the second half of the year.
Support for stocks also stemmed from positive economic indicators, including a drop in weekly jobless claims to a one-month low, coupled with an unexpected rise in the May S&P manufacturing PMI.
Legislative Developments and Economic Concerns
This week’s central focus is on the implications of President Trump’s tax and spending bill, which averts an impending year-end tax increase but may exacerbate the US deficit. As the bill progresses to the Senate, some Republican factions are advocating for significant modifications, with a vote anticipated by August. Concerns linger that this tax legislation could significantly inflate the deficit at a time when the attractiveness of US assets is diminishing.
Investors are cautious as they navigate a trade war, a recent downgrade of the US credit rating from Moody’s, and unfavorable projections surrounding the US budget deficit in the reconciliation bill.
Key Economic Indicators
Recent data from the US reveals that initial unemployment claims fell by 2,000 to 227,000, indicating better-than-expected labor market strength. Additionally, the May S&P manufacturing PMI unexpectedly increased by 1.9 points to 52.3, contrary to forecasts that predicted a decline.
Bitcoin and Cryptocurrency Market Update
Bitcoin (^BTCUSD) surged by over +2%, achieving a new record high today with advancements in stablecoin legislation in the US Senate. A bipartisan effort is underway to finalize a regulatory bill this week.
Market Outlook and Upcoming Data Releases
Looking ahead, market attention will be on key tariff news and possible trade deals. G-7 finance ministers and central bank governors are convening this week in Braniff, Canada. Later today, April existing home sales are projected to rise by +2.0% month-over-month to 4.10 million, while Friday’s new home sales are expected to decrease by -4.7% month-over-month to 690,000.
Current market expectations assign only a 5% probability to a -25 basis point rate cut during the next FOMC meeting scheduled for June 17-18.
Earnings Season Recap
The Q1 earnings reporting season is nearing its end. Almost 90% of S&P 500 companies have reported, with 77% exceeding analysts’ expectations—the highest rate since Q2 of 2024. Earnings growth for Q1 stands at +13.1%, significantly above predictions of +6.6% prior to the season. However, full-year corporate profit growth forecasts for 2025 have decreased to +9.4%, down from +12.5% in early January.
Global Market Performance
International stock markets are mostly lower today. The Euro Stoxx 50 fell by -1.02%. China’s Shanghai Composite closed down -0.22%, and Japan’s Nikkei 225 decreased by -0.84%, marking a two-week low.
Interest Rates and Bond Markets
June 10-year T-notes (ZNM25) have increased by +3 ticks, while the yield on the 10-year T-note has decreased by -0.8 basis points to 4.591%. After initial declines following the passage of Trump’s tax and spending package, T-note prices recovered as short-covering emerged. The unexpected fall in weekly jobless claims suggests labor market strength, casting a hawkish outlook for Fed policies.
In Europe, government bond yields are trending upward, with the 10-year German bund yield rising by +0.1 basis points to 2.647%. The UK’s 10-year gilt yield climbed to a six-week high of 4.799%, increasing by +0.8 basis points.
Economic Data from Europe
The Eurozone’s May S&P manufacturing PMI rose by +0.4 to a 2.75-year high of 49.4, surpassing expectations. However, the S&P composite PMI experienced an unexpected decline of -0.9 to a six-month low of 49.5, diverging from the anticipated increase.
The ECB’s April meeting summary reflected concerns over the negative economic impact of US tariffs and indicated a bias towards potential monetary easing. The German May IFO business climate index rose by +0.6 to an 11-month high, offering a glimmer of optimism amid uncertain conditions.
UK Manufacturing Update
The UK’s May S&P manufacturing PMI fell by -0.3 to 45.1, below forecasts for an increase. Swaps indicate a 93% probability of a -25 basis point rate cut by the ECB at their June 5 policy meeting.
US Stock Movers
Crypto-related stocks are gaining momentum today, with Bitcoin’s price climbing significantly. MARA Holdings (MARA) is up over +7%, and Riot Platforms (RIOT) has risen more than +6%. MicroStrategy (MSTR) leads the Nasdaq 100 with a more than +5% increase, while Coinbase Global (COIN) is up by more than +4% within the S&P 500.
Advanced Auto Parts (AAP) has seen its stock price surge by over +42% following a strong Q1 report, projecting full-year net sales above expectations. Snowflake (SNOW) increased more than +9%, driven by Q1 revenues that surpassed forecasts and an upward revision in their full-year product revenue guidance.
Financial Market Updates: Key Stock Movements and Earnings Reports
Urban Outfitters (URBN) has seen a notable increase of over +22% after reporting Q1 net sales of $1.33 billion, surpassing expectations of $1.29 billion.
Meanwhile, Ralph Lauren (RL) experienced a rise of more than +1% following a Q4 net revenue report of $1.70 billion, which exceeded the consensus estimate of $1.65 billion.
Nike (NKE) also gained over +1% as it announced its return to Amazon’s online store, having exited in 2019. This news positioned Nike as a leader among gainers in the Dow Jones Industrials.
Healthcare Stocks Under Pressure
Managed healthcare stocks are facing challenges today. The Centers for Medicare & Medicaid Services announced a “significant expansion” of its auditing efforts for Medicare Advantage plans. Consequently, Humana (HUM) and CVS Health Corp (CVS) are both down by more than -3%. Additionally, Centene (CNC) is down more than -2%, and UnitedHealth Group (UNH) has decreased by over -1%, leading the losses in the Dow Jones Industrials. Elevance Health (ELV) has also fallen by -0.80%.
Energy Sector Declines
Energy stocks and service providers are trending lower as the price of WTI crude dropped by more than -1%, reaching a one-week low. Devon Energy (DVN), ConocoPhillips (COP), and Halliburton (HAL) all reported declines of over -2%. Diamondback Energy (FANG) also saw a decrease of more than -2%, leading the losses within the Nasdaq 100. Other notable declines include Occidental Petroleum (OXY), Schlumberger (SLB), Phillips 66 (PSX), and Valero Energy (VLO), each down more than -1%.
Stock Downgrade Report
W. R. Berkley (WRB) decreased by -0.65% after Goldman Sachs downgraded the stock to neutral from buy, citing that its reserve position is “relatively worse” than its peers.
Upcoming Earnings Reports
On May 22, 2025, several companies will report earnings, including Analog Devices Inc (ADI), Autodesk Inc (ADSK), Copart Inc (CPRT), Deckers Outdoor Corp (DECK), Intuit Inc (INTU), Ralph Lauren Corp (RL), Ross Stores Inc (ROST), Williams-Sonoma Inc (WSM), and Workday Inc (WDAY).
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. For more details, please view the Barchart Disclosure Policy.
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The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.