Weekly Market Performance — May 23, 2025

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of May 19, 2025. U.S. equities clawed back part of last week’s strong gains as the tariff relief rally lost steam. A slide in global bonds and fiscal concerns weighed on risk sentiment, and week-to-date losses deepened Friday following a fresh wave of tariff threats from the White House. Treasuries ended the week lower after a lackluster 20-year auction fueled a sharp rise in yields. The broader commodities complex gained ground as metals advanced and the dollar declined, offsetting weakness in crude oil and natural gas.

Index Performance

U.S. and International Equities

U.S. Equities: Major U.S. averages closed the week lower after logging the longest string of losses since early April. Risk appetite was muted to start the week amid quiet headlines and relatively thin trading volumes, causing stocks to fluctuate amid growing concerns of swelling debt and deficits as House Republicans continued to negotiate President Donald Trump’s signature tax bill. Waning trade optimism and buyer fatigue were also flagged by markets as Wall Street’s latest rally lost steam. Wednesday’s lackluster 20-year Treasury auction fueled a surge in yields, sending stocks sharply lower in the second half of the mid-week session, before treading water Thursday on solid economic data and the advancement of the reconciliation bill. However, losses deepened Friday as trade concerns reignited ahead of the long weekend. Shortly after reports suggested Washington is pressuring the European Union (EU) for more trade concessions, President Donald Trump remarked on social media about little trade negotiation progress, threatening 50% levies for the EU starting in June. Shares of Apple (AAPL) tumbled after the President also warned the company will face a 25% tariff if U.S.-sold iPhones continue to be produced overseas.

In corporate news, retailers took center stage with mixed earnings results and developments. Target’s (TGT) earnings report drew investor attention after the retailer missed estimates and cut guidance, while Lowe’s (LOW) held guidance steady and topped earnings expectations. Home Depot (HD) also reiterated its fiscal year guidance and stated it has no plans to raise prices, while Nike (NKE) announced it will make products available on Amazon (AMZN) for the first time since 2019, while reports circulated that the sportswear-maker may be raising prices.

International Equities: European stocks closed lower, erasing weekly gains on Friday after fresh trade concerns washed over global markets, forcing traders to pare back European Central Bank (ECB) rate cut bets. For most of the week, markets cautiously moved higher as investors refrained from outsized bets amid rising bond yields and an ebbing tariff reprieve rally, with positive commentary around Monday’s post-Brexit deal contributing to the measured upside. On the corporate front, low-cost British airline EasyJet reported worse-than-feared losses and German communications provider Freenet missed earnings estimates, while budget- friendly airline Ryanair jumped after signaling robust summer demand and announcing a share buyback program.

Asian markets ended the week mostly lower. Japanese markets were in focus as stocks dropped while government bond yields surged amid ongoing concerns surrounding the Bank of Japan’s (BOJ) plan for tapering bond purchases. Japanese equities closed with a measured decline after a solid Friday session helped trim week-to-date losses, as rate hike hopes received a lift after stronger-than-expected consumer inflation data. Taiwan ended lower despite a mid-week lift from chip stocks, while South Korea led declines, failing to overcome support from pharma names after state officials promised to provide support in padding tariff impacts. Hong Kong gained ground and mainland China closed mixed with the upside supported by positive corporate developments in the healthcare and tech sectors.

Fixed Income, Currency, and Commodity Markets

Fixed Income: The Bloomberg U.S. Aggregate Index traded lower this week. The rate-sensitive two-year yield ended roughly one basis point (0.01%) lower than when the week started, and the 10-year yield ended up roughly two basis points (0.02%) higher. The 30-year yield traded in a 26-basis point (0.26%) range and ended eight basis points (0.08%) higher.

The reasons for this week’s Treasury market sell-off are many: elevated inflation expectations, improved economic growth expectations, a Fed on hold, foreign buyer boycotts, the recent Moody’s downgrade, and the potential for more debt and deficit spending (which are all likely exacerbated by an illiquid Treasury market). And while the recent downgrade by Moody’s was likely an additional source of angst, the underlying drivers of the downgrade, specifically ongoing debt and deficit spending, continue to be the primary reason for selling, in our view. The recent selloff in longer term rates isn’t solely a U.S. phenomenon; 30-year yields for most developed market sovereigns moved near recent highs also. However, with inflation still running above most central bank targets and with expanding debt and deficits the new normal in many developed market sovereigns, the boycott on duration will likely continue to push longer-term yields higher.

Wednesday’s middling 20-year Treasury auction was scrutinized to gauge investor interest and caused the Treasury Department to pay more than market expectations to entice demand, which didn’t really materialize. Further, this week’s Japanese 20-year auction was the worst since 1987, which also put upward pressure on global yields. Thursday morning’s price action following the U.S. House of Representatives narrowly passing President Trump’s tax bill suggested that the bond market is not in favor of the proposed bill. While the recent sell-off has not been due to higher inflation expectations, bond market investors will likely continue to vote with their feet unless/until economic data weakens enough to cause the Fed to act and cut rates.

Commodities and Currencies: The Bloomberg Commodities Index traded higher this week, reversing last week’s decline. A strong week for metals lifted the broader commodities complex, offsetting declines in crude oil and a weaker dollar. Gold prices rose as investors rotated away from both equities and fixed income securities amid the slide in global bonds following last weekend’s credit rating downgrade for U.S. government debt and weak 20-year auctions in the U.S. and Japan. Silver and copper also printed strong gains. West Texas Intermediate (WTI) crude declined, despite a mid-week rise in geopolitical headlines after U.S. intelligence suggested Israel may be considering a strike on Iranian nuclear facilities. Crude ultimately declined on an unexpected rise in U.S. crude and fuel inventories, raising ongoing demand concerns — imports climbed to a six-week high while gasoline and distillate demand contracted. The dollar steadily weakened against its peers this week on little progress in trade negotiations and Friday’s threat to the EU, and was broadly weighed down by fiscal concerns, snapping a four-week winning streak.

Economic Weekly Roundup

The economic calendar was relatively quiet over the last five days, with most of the highlights arriving in the second half of the week. Thursday hosted the busiest day of the week on the data front, with initial applications for unemployment benefits last week arriving at 227,000 versus 230,000 expected, also marking a tick down from the prior reading, consistent with a historically low level of layoffs. Continuing claims inched slightly higher. The preliminary May reading of the Purchasing Managers’ Index (PMI) surprised to the upside with the report noting improving growth and outlook, but both remain subdued due to tariff concerns. With a quiet calendar, some focus landed on various remarks from central bank officials throughout the week, with most reiterating the Federal Reserve's (Fed) “wait-and-see" stance regarding future rate cuts. Elsewhere, President Trump’s reconciliation bill passed the U.S. House of Representatives on Thursday. The administration’s trade policy dampened the fiscal stimulus narrative around the bill as the tariff-related growth hit will likely offset the boost to growth from the package.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: Memorial Day Holiday, no economic releases scheduled

• Tuesday: Durable Goods Orders (Apr preliminary), Capital Goods Orders and Shipments (Apr preliminary), FHFA House Price Index (Mar), House Price Purchase Index (1Q) S&P Case-Shiller U.S. 20-City and National House Price Index (Mar), Conference Board Consumer Confidence Report (May), Dallas Fed Manufacturing Activity (May)

• Wednesday: MBA Mortgage Applications (May 23), Richmond Fed Manufacturing Index (May), Richmond Fed Business Conditions (May), FOMC Meeting Minutes (May 7)

• Thursday: Gross Domestic Product (1Q second reading), Personal Consumption (1Q second reading), Core PCE Price Index (1Q second reading), Initial Jobless Claims (May 24), Continuing Claims (May 17), Pending Home Sales (Apr)

• Friday: Personal Income (Apr), Personal Spending (Apr), Headline and Core PCE Price Index (Apr), Advance Goods Trade Balance (Apr), Wholesale Inventories (Apr preliminary), Retail Inventories (May), MNI Chicago PMI (May), University of Michigan Consumer Sentiment Report (May final)

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

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Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

Bonds are subject to market and interest rate risk if sold prior to maturity.

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High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings of commodities will result in significant volatility in an investor's holdings.

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