Weekly Market Update – June 6, 2025

Quick Takes

• A solid May Employment Situation Report and positive developments on the trade front helped push the S&P 500 back above the 6,000 level for the first time since February. The index gained +1.5% for the week and is just -2.3% from its February 19 all-time high.
• The rally was robust with 8 of the 11 S&P 500 sectors advancing for the week and the small cap Russell 2000 Index leading the major U.S. indices with a +3.2% gain. The tech-heavy Nasdaq Composite Index was up +2.2%.
• Nonfarm payrolls increased by 139,000 in May, and while that was a slowdown from the prior month, it comfortably beat Wall Street expectations, as did Job Openings. Meanwhile,  S&P Global U.S. Purchasing Managers Indexes (PMI) for May were stronger than expected.  

Source: Bloomberg. Data as of June 6, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks extend gains on jobs data and waning trade tensions

A solid May Employment Situation Report on Friday highlighted the continued resilience in hard economic data. Nonfarm payrolls increased by 139,000 in May, and while that was a slowdown from the prior month, it comfortably beat Wall Street expectations for 126,000 new jobs. The May jobs report is detailed further in the Chart of the Week section below. The unemployment data continues a trend since President Donald Trump’s so-called “Liberation Day” tariffs announcement, in which soft data (like survey- and sentiment-based reports) have sunk while hard data (actual economic activity like jobs, inflation, and spending) has held up well. Markets are clearly reacting to the hard data, suggesting they expect the soft data to eventually improve and converge back with the hard data. Stocks closed at their highest level since February on Friday with a +1.5% weekly advance in the S&P 500 Index, pushing the index back above 6,000. Gains were robust, with 8 of the 11 S&P 500 sectors advancing for the week. Also reinforcing the improved breadth of the rally, small cap stocks were strong with the Russell 2000 Index leading the major U.S. indices with a +3.2% gain. The tech-heavy Nasdaq Composite Index was up +2.2%.

The presidents of the world’s two largest economies held a phone call on Thursday, which Trump characterized as “very good”, and Xi Jinping invited him to visit China, an offer that Trump returned. On Friday, Trump said officials of his administration would meet for another round of trade talks with Chinese representatives in London on Monday, June 9. That, along with the positive jobs growth, buoyed stocks to close near their highest levels of the week and leaving the S&P 500 just -2.3% from its February 19 all-time high. The index has climbed +20.4% since the April 8 tariff-induced trough. 

Foreign stocks also gained, but trailed their U.S. counterparts for a second straight week. The MSCI EAFE Index (developed market non-U.S. stocks) was up +0.7% last week. European stocks were up after the European Central Bank (ECB) trimmed its key rate by a quarter point to 2%, the lowest level since 2022. Eurozone Gross domestic product (GDP) was also revised higher, to the fastest expansion since Q3 2022. Japan’s stock markets fell as household spending slipped and wages declined, but the Bank of Japan (BoJ) still stressed their willingness to raise interest rates. The MSCI Emerging Markets Index rebounded from the prior week’s losses, rising +2.2% last week. Chinese stocks advanced on hopes of government stimulus after a batch of poor economic data. They were also buoyed by the positive developments on the trade discussions with the U.S.  

In the bond market, U.S. Treasury yields rose across the curve with the benchmark U.S. 10-year Treasury yield ending the week up +11 basis points at 4.51%, exactly offsetting the prior week’s decline. The U.S. 2-year Treasury yield was up +14 basis point, ending at 4.04%. Fed Funds futures trimmed bets that the Federal Reserve will cut interest rates this year. Interest-rate swaps showed traders now see a roughly 70% chance of a quarter-point rate cut by September, compared with a probability of about 90% on Thursday. The amount of easing priced in for the year declined to about 43 basis points, now less than two quarter-point cuts. With all that in the background, the Bloomberg U.S. Aggregate Bond Index slipped -0.4% for the week. Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were up a modest +0.2% for the week.

Chart of the Week

The May Employment Situation Report continued to show a resilient labor market as new Non-Farm Payrolls (NFP) totaled 139,000. That was a slowdown from 147,000 the prior month, which was revised lower from the originally reported 177,000, but it easily beat Wall Street forecasts for 126,000 payrolls. March was also revised lower by -65,000. The prior two months of downward revisions was the big negative in the report, but overall, the report painted a positive picture. The Unemployment Rate remained unchanged at +4.2%, as expected. According to the Bureau of Labor Statistics (BLS) report, Health care continued to be a leader in job creation, adding 62,000 jobs. Other sectors posting gains included Leisure and Hospitality with +48,000 and Social Assistance, which added +16,000 jobs. Declines were in Federal Government employment (-22,000) and in Professional and Business Services (-18,000). Wages grew faster than expected, with Average Hourly Earnings (AHE) up +0.4% from +0.2%, more than the +0.3% expected. Year-over-year, AHE were up +3.9%, unchanged from the prior month, and higher than the +3.7% annual rate expected. The Fed would like to see wage growth slow to around +3% annually or less, a level it sees as consistent with low inflation. Average Weekly Hours Worked were steady at 34.3 as expected. Labor-Force Participation was down a bit to 62.4% from 62.6%, where it was expected to stay. Of concern, the Survey of Households, which is used to determine the Unemployment Rate, was much weaker than the Establishment Survey used to compute the headline payrolls growth. The Household Survey, generally the more volatile of the two, showed a drop of -696,000 workers, of which 623,000 were full-time jobs. May Private Sector Payrolls increased by 140,000, following 146,000 the prior month (revised down from 167,000). The bottom line was that job growth was stronger than expected again, including private sector jobs, while government jobs declined for the fourth straight month, suggesting the economy is still on solid footing despite tariff uncertainty and geopolitical flare ups.

U.S. payrolls rise 139,000 in May, Beating Wall Street Expectations

Monthly job creation in the U.S. (Jan. 2022 – May 2025)

Source: U.S. Bureau of Labor Statistics via FRED, CNBC.

The Week Ahead

Next week is light for the economic calendar, but the Consumer Price Index (CPI) will be released by the U.S. Bureau of Labor Statistics (BLS) on Wednesday and will command a lot of attention. It comes just one week before the Federal Open Market Committee (FOMC) announces its monetary-policy decision. With the labor market resilient and the inflation gauges ticking up, the Federal Reserve is expected to keep rates unchanged. Wholesale inflation, the Producer Price Index (PPI), is reported a day later on Thursday. Other economic data released next week include the Small Business Optimism Index, released by the National Federation of Independent Business (NFIB) on Tuesday. The University of Michigan releases its Consumer Sentiment index on Friday.

Outside of economic reports, other notable events include Apple’s Worldwide Developers Conference and earnings reports from GameStop on Tuesday, Chewy and Oracle on Wednesday, and Adobe on Thursday. Also on Monday, the U.S. will hold trade talks with China. Last Thursday, President Trump held a call with Chinese leader Xi Jinping to discuss trade issues, including China’s slow approval of rare earth export licenses. 

Did You Know?

JOB SECURITY – 69% of US consumers see a recession as ‘somewhat’ or ‘very likely’ in the next 12 months. Despite those elevated expectations, only 22.9% of consumers are ‘extremely’ or ‘somewhat’ worried about losing their jobs compared with 29.1% who are not worried at all. (Source: Conference Board)

ALL BARK, NO BITE – The S&P 500 ended the first 100 trading days of 2025 up just +0.11% year to date, even though it was the seventh most volatile first 100 days in the last 70+ years based on the index’s 23.3% spread between its lowest and highest closing prices during the period. (Source: Bespoke)

TARIFF UNCERTAINTY PLUMMETS – Google searches for “tariffs” have fallen -87% from record highs seen in early April, and a US Economic Policy uncertainty index dating back to 1985 has fallen -73% since peaking on April 5 at its second-highest reading ever. (Sources: Baker, Bloom, and Davis, Google)

This Week in History

CHRYSLER CREATED – On June 6, 1925, Walter P. Chrysler founded Chrysler as the successor corporation to the failing Maxwell Motor Car. Its first original model, the Chrysler Four, astounded motorists with its blazing top speed of 58 mph. (Source: The Wall Street Journal)

Economic Review

• Unlike the competing ISM report, the final S&P Global U.S. Manufacturing Purchasing Managers Index (PMI) managed to remain in expansion territory in May, coming in at 52.0, down just a bit from the 50.3 preliminary ‘flash’ estimate two weeks ago, and up from the prior month’s 50.2 final reading (levels above 50 indicate economic expansion, while levels below 50 indicate contraction). The growth was driven by a record rise in input inventories as New Orders and Inventories both rose at an unprecedented pace for the 18 years of data collection — clearly a result of tariff actions. Like the ISM report, New Order growth was primarily in the U.S. while international sales remained subdued, rising ever slightly after the steep drop in April. Input Price inflation remained high, but did drop to a 3-month low. Meanwhile, Output Price inflation increased at the fastest rate since 2022 as suppliers attempted to pass along the higher Input Prices. The key takeaway is that the S&P PMI reports showed decent overall growth compared to the ISM result and was the best level since February’s recent high before all the tariff turmoil. 
• Similarly to the manufacturing PMI, the S&P Global U.S. Services PMI contradicted the competing ISM Services Index, rising to 53.7 in May, stronger than the 52.3 preliminary flash estimate two weeks ago and up from the final 50.8 reading in April. A noticeable acceleration in New Business activity drove the upside surprise after hitting a 17-month low in April. Importantly, activity has now expanded on a consecutive monthly basis since February 2023. Like the ISM reports, activity was primarily among domestic-based customers as foreign sales declined for a second straight month. Sentiment improved materially as well, with Business Confidence of service providers its highest in four months. Employment also improved during May, the third straight monthly rise. Input Costs accelerated steeply to the highest levels since June 2023. Wages were also a factor in pushing up costs. As a result, Selling Prices jumped noticeably as well, hitting the highest level since August 2022.
• The Institute for Supply Management’s (ISM) Manufacturing PMI slipped to 48.5 in May from an unrevised 48.7 the prior month, which was below expectations for a rise to 49.5%. The culprit for the downside surprise was a big miss in New Export Orders, which dropped to 40.1% from 43.1% in April, which, outside the Covid pandemic, is the lowest reading since March 2009. Otherwise, the report was mostly improved from the prior month, with the overall index of New Orders, a sign of future demand, up to 47.6% from 47.2%. The Production barometer rose to 45.4% from 44.0%. Employment increased to 46.8% from 46.5%. The Prices Paid index, a measure of inflation, dipped to 69.4% from 69.8% (which was the highest since July 2022). The manufacturing sector has been stuck in stall mode for some time now, falling below the dividing line between economic expansion (above 50%) and contraction (below 50%) for all but 2 months since November 2022.
• The corresponding ISM Services PMI fell into contraction territory in May, coming in at 49.9%, down from an unrevised 51.6% in April. This is only the fourth time in the last 60 months that the Services PMI has been below the key 50.0% level. That result was well below Wall Street consensus expectations for a rise to 52.0%. Service-oriented companies, such as restaurants and retailers, employ the majority of Americans. The New Orders component sank to 46.4% from 52.3%, and the Business Activity/Production component was down to 50.0% from 53.7%. The Employment component improved to 50.7% from 49.0%. The Prices Paid component jumped to 68.7% from 65.1%. That’s the highest level since November 2022 — a warning sign that inflation pressures may be re-emerging. The overall tone of the report was one of stagflation, with a disappointing mix of slowing growth and rising prices. It is only one report, though, and other soft data for May has already shown improvement from the facing tariff uncertainty.
• The Job Openings Labor Turnover Survey (JOLTS) showed that Job Openings rose to 7.391 million in April from a six-month low of 7.200 million in March (revised up from 7.192 million). That was above expectations for 7.100 million. Job Openings peaked at 12 million in 2022, but companies have since cut back on hiring. Job openings fell the most in retail sales, finance and insurance, healthcare, and social assistance. Job openings are an indication of the health of the labor market and the broader U.S. economy. The ratio of Job Openings to Unemployed Workers was 1.03, up from 1.02 the prior month and down from a peak of 2.0 in July 2022, which is the prepandemic level the Fed wants to see it at. The Number of People Quitting Jobs was 3.194 million, down from 3.344 million the prior month. The record was 4.5 million job quitters in late 2021. The Quits Rate was 2.0%, down a tick from an unrevised 2.1% the prior month. People tend to quit less often when the economy softens, and jobs become harder to find. The Layoffs Rate was up a tick to 1.1% from 1.0% the prior month. The Hiring Rate also unexpectedly ticked higher to 3.5% from 3.4%.
• The Commerce Department reported that Factory Orders fell -3.7% for the month of April, which was below expectations for a -3.2% drop, and down from +3.4% the prior month (revised down from +4.3%). Factory Orders Ex Transportation were down -0.5%, short of expectations for a +0.2% increase and unchanged from the prior month after a downward revision from -0.2%. Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment sank -6.3%, matching expectations, but down from the prior month’s +7.6% rise when there was a rush to front-run tariffs. Durable Goods Orders Excluding Transportation were up +0.2%, as expected, after being down -0.2% the prior month. The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, was down -1.5%, below expectations of -1.3%, and down from +0.3% in March. Core Capital Goods Shipments, which are factored into GDP, fell 0.1%, in line with expectations.  
• According to the U.S. Bureau of Economic Analysis, the U.S. Trade Deficit plunged in April to $61.1 billion after hitting a record -$138.3 billion in March (revised higher from -$140.5 billion). That was better than the -$66.0 billion deficit expected. Smaller trade deficits help contribute to economic growth, while larger deficits inhibit growth. The sharp narrowing was the result of April Exports jumping $8.3 billion more than March exports, while April Imports were $68.4 billion more than March imports. The Imports detracted sharply from Q1 GDP in March but should contribute heavily to Q2 GDP.
• Outstanding U.S. Consumer Credit increased +$17.873 billion in April, far above expectations for a +$10.0 billion increase, and the prior month’s +$8.599 billion rise (revised down from the initially reported +$10.172 billion). That amounts to a +4.3% annual growth rate for the month, up from the +2.1% annualized growth rate the prior month. Growth for revolving credit, such as credit cards, was at a +7.0% rate, up from the prior month’s +1.6% rise. Nonrevolving credit, which tends to be much less volatile than revolving credit and includes auto as well as school loans, rose at a +3.3% rate following the prior month’s +2.2% increase. The data from the Federal Reserve is not adjusted for inflation and does not include mortgage loans, which is the largest category of household debt.
• The Commerce Department reported that Construction Spending fell -0.4% in April, far short of the +0.2% increase expected, but up from the prior month’s -0.8% drop (revised lower from -0.5%). Over the past year, construction spending was down -0.5%, down from the +1.2% annual rate the previous month. That is the first negative annual reading since April 2019. Total Private Construction was down -0.7% after a -1.0% drop the month before, and total Public Construction was up +0.4% after a flat reading the prior month. Private Residential Spending fell -0.9% month-over-month, and private Nonresidential Spending was down -0.5%. The report showed that single-family construction was down -1.1%, after a +0.1% rise the prior month, and multifamily construction was down -0.1%, reversing the +0.1% rise the prior month. The key takeaway from the report is that residential spending weakened noticeably in April, led by a slowdown in single-family construction.
• Weekly MBA Mortgage Applications fell -3.9% for the week ending May 30, following a -1.2% drop the prior week. The Purchase Index was down -4.4% after rising +2.7% the prior week. The Refinance Index dropped -3.5% after declining -7.1% the prior week. The average 30-Year Mortgage Rate fell to 6.92% from 6.98% the prior week.
• Weekly Initial Jobless Claims rose +8,000 to 247,000 for the week ending May 30, worse than expectations for 235,000. The prior week was revised lower by -1,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell by +3,000 to 1,904,000 in the week ending May 23, worse than expectations for 1,910,000 claims. Last week’s reading was revised lower from 1,919,000 to 1,907,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.