Weekly Market Performance — May 30, 2025

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of May 26, 2025. Stocks printed modest weekly gains as trade headlines returned to center stage in earnest following the long weekend for Wall Street. However, major averages clung to gains powered by NVIDIA’s (NVDA) quarterly update and tariff reprieve for Europe. International stocks were mixed with European shares moving slightly higher while Asian markets were pushed and pulled between local and global headlines. Treasury yields ended lower while commodities broadly fell.

Index Performance

U.S. and International Equities

U.S. Equities: U.S. shares gained ground over the Memorial Day holiday week with all three major averages moving higher over the last four days. Starting the week on a four-day losing streak, stocks quickly bounced back after the long weekend as trade headlines stepped back into the spotlight. The Trump administration announced a delay for levies on the European Union (EU) after the supranational organization agreed to fast-track trade talks, pushing stocks sharply higher Tuesday with additional support from an unexpected rebound in consumer confidence and lower Treasury yields. Despite the reprieve, stocks churned the remainder of the week after the U.S. Court of International Trade (CIT) struck down most of President Trump’s tariffs. The administration quickly filed an appeal that was stayed by a U.S. appeals court, allowing the duties to remain in effect while the executive orders are under judicial review. Trade angst continued to linger over Wall Street to cap the week as President Trump accused Beijing of violating its trade agreement with the U.S., leading stocks to trim weekly losses Friday afternoon.

In addition to the EU tariff delay, a bright spot that supported major averages was artificial intelligence (AI) bellwether NVIDIA’s (NVDA) earnings report. Takeaways from the chipmaking giant’s report centered around steady revenue guidance and better-than-feared impact from U.S. export controls, positive news for the secular AI growth theme.

International Equities: The European benchmark STOXX 600 Index ended modestly higher. Between the Memorial Day holiday in the U.S. and some local markets shuttering exchanges for the Ascension Day holiday, trading volume was thin. The region broadly received a boost from a notable upturn in consumer confidence in May but faded slightly over the latter half of the week. Support stemmed from reports suggesting that EU trade policy negotiators could take a moderate stance in order to make progress in trade talks, and European Central Bank (ECB) survey data indicating inflation expectations ticked higher ahead of next week’s widely expected ECB rate cut. However, gains were measured as investors parsed trade updates and a flurry of data on Friday, including a sharp month-over-month drop in German retail sales from -0.2% in March to -1.1% in April.

Asian stocks ended mixed, with greater China leading losses amid the latest U.S. trade developments. Japanese equities moved higher, with brief U.S. tariff optimism following the CIT decision bolstering the weekly advance. Sentiment remained frothy as Bank of Japan (BOJ) officials’ attempt to calm markets after last week’s bond sell-off collided with the weakest 40-year auction in two years, placing downward pressure on stocks. South Korea also printed a solid gain on the back of bolstered rate cut bets after the Bank of Korea slashed economic growth forecasts and delivered a 0.25% rate cut. Taiwan ended an abbreviated week lower amid signs of deteriorating consumer sentiment and a downtick in economic growth estimates.

Fixed Income, Currency, and Commodity Markets

Fixed Income: The Bloomberg U.S. Aggregate Index traded higher this week. The monetary policy rate-sensitive two-year yield ended roughly five basis points (0.05%) lower than when the week started, and the 10-year yield ended up roughly 10 basis points (0.1%) lower.

Potential headwinds for Treasury yields have been a major focus lately, including policy uncertainty, a related increase in term premium, an ongoing lack of fiscal restraint, the de-dollarization story and fear of asset sales, the market contemplating a more dovish Federal Reserve (Fed), better-than-feared economic data, and higher non-US yields, to name a few. But, despite all those concerns, Thursday was a reminder that Treasury yields will largely follow the economic data. Yields were higher going into Thursday’s economic data dump but reversed lower after a rise in initial claims and the revised first quarter GDP print that showed a weaker-than-originally-expected consumer in the quarter. Price action was bolstered after a strong 7-year Treasury auction, and yields closed five to six basis points lower on the day. Treasury yields are primarily a function of growth and inflation expectations, so as the economic data goes, so go Treasury yields. Obstacles remain for a sustained rally in rates, but if the economic data starts to show a weakening economy, particularly with next week’s jobs report, Treasury yields will likely fall from elevated levels.

Commodities and Currencies: The Bloomberg Commodities Index traded lower this week, continuing to whipsaw between weekly gains and losses. West Texas Intermediate (WTI) crude oil prices fell for the second consecutive week on the latest ramp-up in U.S.-China trade tensions, just as focus turns to the upcoming OPEC+ meeting, which will decide July output levels — following a 411,000-barrel per day hike for June. Natural gas prices dropped as traders eyed a rise in storage space and rising U.S. stockpiles. Metals also dropped this week, with gold, silver, and copper all declining over the last five days. Meanwhile, the U.S. dollar strengthened against its peers slightly this week, but remained lower for the month of May, capping its fifth straight monthly loss. The greenback continued to feel pressure from Washington’s erratic trade policies as its traditional appeal as a haven asset remains weak due to concerns of tariffs undermining the economy.

Economic Weekly Roundup

“As Good As It Gets.” As LPL Research expected, headline inflation decelerated in April to what is likely the lowest inflation print for the rest of the year. It's as good as it gets since prices will likely reaccelerate in the coming months. Headline inflation decelerated to 2.1% annually, the lowest print of 2025. Core was 2.5% from a revised 2.7% in March. Inflation will likely reaccelerate for the remainder of 2025 as both supply and demand pressures will push annual inflation rates higher. The savings rate rose to 4.9%, the highest in a year, as incomes grew faster than spending. Real disposable personal income rose 0.7% from a month ago, the fastest pace since January 2024, indicating the stable job market is providing the necessary support for an economy filled with uncertainty.

The growth in real income is providing the necessary support for households uncertain about the current macro landscape. As long as the job market remains stable, the Fed has the luxury of remaining in “wait and see” mode. We think there is upside risk to inflation as many baseline forecasts cannot reasonably account for the fluid tariff policy.

Is waiting for more clarity a blessing in disguise? The minutes from the Federal Open Market Committee (FOMC) explained why they are in “wait and see” mode. Minutes from the May meeting of the FOMC revealed a blessing in disguise. The reason the committee can remain in “wait and see” mode is because the economy is holding up well enough for them to focus on the inflationary impact from tariffs. The committee views the labor market — wage growth in particular — as still solid, yet not a likely source of inflationary pressure. As LPL Research previously noted, businesses are ready to deploy capital, but because of recently introduced trade uncertainty, many businesses have delayed capital expenditure plans. Some participants noted the change in historical correlations across assets. Rising bond yields, a depreciating dollar, along with a concurrent decline in equity prices, could be an ominous sign that U.S. assets are no longer considered a safe haven investment.

The economy is holding up well enough for the Fed to wait until successful trade negotiations provide some clarity on the outlook. The labor market would have to meaningfully deteriorate before the Fed would consider cutting rates.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: S&P Global U.S. Manufacturing PMI (May final), ISM Manufacturing report (May), Construction Spending (Apr)

• Tuesday: Factory Orders (Apr), Durable Goods Orders (Apr final), Capital Goods Orders and Shipments (Apr final), JOLTS Job Report (Apr), Wards Total Vehicle Sales (May)

• Wednesday: MBA Mortgage Applications (May 30), ADP Employment Change (May), S&P Global U.S. Services and Composite PMIs (May final), ISM Services Index (May)

• Thursday: Challenger Job Cuts (May), Trade Balance (Apr), Nonfarm Productivity (1Q final), Unit Labor Costs (1Q final), Initial Jobless Claims (May 31), Continuing Claims (May 24)

• Friday: Change in Nonfarm, Private, and Manufacturing Payrolls (May), Unemployment Rate (May), Average Hourly Earnings (May), Average Weekly Hours All Employees (May), Consumer Credit (Apr)

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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