Weekly Market Update – June 20, 2025

Quick Takes

• U.S. stocks were little changed in the holiday-shortened week, as investors digested increased tensions in the Israel – Iran conflict and underwhelming U.S. economic data. The S&P 500 slipped -0.2%, the Nasdaq was up +0.2%, and the Russell 2000 gained +0.4%.
• Like equity markets, bond markets were also relatively flat. Yields on the 2- and 10-year Treasury bonds were down -2 and -4 basis points, respectively. The Bloomberg U.S. Aggregate Bond Index returned +0.3% for the week while the Bloomberg Global Aggregate ex U.S. Bond Index (international bonds) returned -0.4%.
• The biggest news came after the week ended when, at roughly midnight Saturday, the U.S. struck three nuclear sites in Iran crucial to its nuclear program, including the uranium-enrichment facilities at Fordow. It remains unclear if this is the end of the U.S. involvement.

Source: Bloomberg. Data as of June 20, 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.

Markets were little changed in the holiday-shortened week

Stock and bond indexes were largely flat for the holiday-shortened week, as investors processed underwhelming economic data, the escalating conflict between Israel and Iran, and the Federal Reserve’s fourth monetary policy decision this year. Tension between Israel and Iran intensified last week, with both countries targeting each other with waves of missile strikes. U.S. President Donald Trump said he would take up to two weeks to decide whether the U.S. would launch strikes on Iran’s nuclear facilities. But in a surprise move on Saturday evening, the U.S. did indeed become directly involved in the conflict. In an operation dubbed “Midnight Hammer,” the U.S. struck three nuclear sites in Iran crucial to its nuclear program, including the uranium-enrichment facilities at Fordow. Bloomberg reported that, according to the International Atom Energy Agency (IAEA), there were no signs of radioactive contamination. Israel and Iran continued to conduct strikes against each other on Sunday, and Iran vowed further retaliation. Brent oil prices rallied as much as +5.7% to $81.40 a barrel once markets opened on Sunday. The Middle East region produces roughly a third of the world’s oil and is obviously very important to global energy. It remains unclear if this is the end of U.S. involvement. Air Force General Dan Caine, chairman of the Joint Chiefs of Staff, told reporters Sunday that the operation was “designed to severely degrade” Iran’s nuclear infrastructure. But he said additional assessments of the damage were needed before the Pentagon could rule out the possibility that some of Iran’s nuclear capability remained. The U.S. dollar also quickly strengthened as investors sought safe-haven assets.

U.S. stock futures and Asian stock markets opened this week lower after trading roughly sideways over last week. Outside the threats in the Middle East, U.S. interest rate policy, retail sales, and housing starts – as well as homebuilder confidence – were the major focal points. On Wednesday, the Fed’s monetary policy committee left the key policy rate unchanged as widely expected. The committee’s updated economic projections for 2025 still showed two rate cuts, but growth expectations were revised downward as unemployment and inflation estimates were raised. Fed Chairman Jerome Powell underscored that the uncertainty surrounding tariffs was still extremely high. He said the Fed would proceed with a wait-and-see approach while watching for the full impact of tariffs to show up in economic data. Most of the economic data last week wasn’t much help to markets, largely coming in short of Wall Street expectations. U.S. Retail Sales fell as shoppers reduced spending in May. Industrial Production fell in May despite the pause in reciprocal tariffs announced in early April. Homebuilder confidence in the market for newly built single-family homes fell in June. The Conference Board’s Leading Economic Index continued to decline as well.

For the week, the S&P Index slipped -0.2%, ending the week below 6,000. The tech-heavy Nasdaq Composite Index was up +0.2%, while the small-cap Russell 2000 Index advanced +0.4%, making it the U.S. leader for the week. Foreign stocks fared worse than their U.S. counterparts. The MSCI EAFE Index (developed market non-U.S. stocks) was down -1.5% last week, but the MSCI Emerging Markets Index was barely down at -0.02%.  

Like the equity markets, the bond market also was little changed last week. Short- and intermediate-term U.S. Treasury yields declined, with the benchmark U.S. 10-year Treasury yield ending the week down -2 basis points at 4.38%. The U.S. 2-year Treasury yield was down -4 basis points, ending at 3.91%. With Treasury yields down, the Bloomberg U.S. Aggregate Bond Index inched up +0.3% for the week. Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were down -0.4%.

Chart of the Week

The Commerce Department reported that advanced read on U.S. Retail Sales for May showed a drop of -0.9%. That was below Wall Street expectations for a -0.6% decline and down from a -0.1% decrease the prior month (revised lower from -0.1%). Retail sales represent about one-third of all consumer spending and offer clues on the strength of the economy. After rushing to buy new cars in March before tariffs raised prices, sales of motor vehicles and parts dealers sank -3.5% in May. Auto sales account for one-fifth of all retail sales. Retail Sales Ex-Autos were down -0.3%, below expectations of +0.2%. Sales Ex-Autos and Gas were stronger but still slightly negative at -0.1%, but still short of expectations for a +0.3% rise. Both were revised lower from the prior month, to 0.0% and +0.1% respectively. The Control Group, a figure used to calculate Gross Domestic Product (GDP), increased +0.4%, above expectations for a +0.3% increase and up from -0.1% the prior month (which was revised higher from -0.2%). Restaurant Sales, a key economic barometer, slipped -0.9% after increases of -0.8% and +2.5% in March and April, and are up +6.4% in the past year. Americans tend to eat out or buy more takeout when the economy is healthy, and they feel secure in their jobs. The bottom line is that the report showed consumers are still cautious and pulled back on spending in 7 of the 13 categories, mostly discretionary categories like restaurants, electronics, health and personal care, and building materials.

Shoppers reduced spending at U.S. retailers in May

U.S. Retail Sales and the S&P 500 Index (June 2020 – Latest*)

Source: Commerce Department, Bloomberg. *S&P 500 as of June 20, 2025, and Retail Sales as of May 31, 2025.

The Week Ahead

After the holiday-shortened week, this week will be a busy one for Wall Street. The economic calendar is chock full, beginning on Monday with the June S&P Global flash (preliminary) Purchasing Managers’ Indexes (PMIs) for the U.S. as one of the biggest highlights in the week ahead. Although not as well regarded as the PMI, reports from the competing, and longer produced, Institute for Supply Management (ISM), the flash S&P Global U.S. PMI surveys are an important early indicator of manufacturing and services activity growth. The data come amid concerns about President Trump’s tariff policy and the Israel-Iran conflict. S&P Global will also release PMIs for the eurozone and the U.K. 

Housing data will be prominent too, with Existing Home Sales on Monday, the S&P Case-Shiller Home Price Index on Tuesday, weekly MBA mortgage applications and New Home Sales on Wednesday, and then Pending Home Sales on Thursday. 

The Conference Board’s Consumer Confidence survey for June will have some importance in light of recent weak confidence and sentiment indicators moving markets, given tariff worries. The latest data will be released Tuesday. The final June University of Michigan Consumer Sentiment survey is released Friday. A big spotlight will also be on the Friday release of the May reading for the Core Personal Consumption Expenditures (PCE) Price Index, widely seen as the Fed’s preferred inflation gauge. 

Federal Reserve chairman Jerome Powell will get some attention on Tuesday and Wednesday, with his semiannual monetary policy report to the U.S. House and Senate, respectively. Also in focus will be the results of the Fed’s annual bank stress test, or the evaluation of a lender’s ability to weather crises such as a financial crash or a recession.

Did You Know?

DEPENDS ON WHO YOU ASK – The May release of the New York Fed Survey of Consumer Expectations showed inflation expectations for the next year declined from +3.63% to +3.20%. That compares to the University of Michigan Survey, which showed inflation expectations of +6.6%. The +3.4 percentage point spread between the two is the widest on record. (Source: The Wall Street Journal)

TARIFF BONANZA – After hitting a record high of $15.63 billion in April, customs duties on US imports hit another record of $22.17 billion in May, increasing +270% from the same month last year. Annualized, tariff revenues in April and May work out to $226 billion per year. (Source: Congressional Budget Office)

ENTRY LEVEL EROSION – Employees reporting a positive six-month business outlook for their employers in Glassdoor’s monthly survey fell to a record low 44.1% in May, driven by record low employee confidence from entry-level workers and those in government and public administration. (Source: Glassdoor)

This Week in History

JAWS GOLDEN ANNIVERSARY – 50 years ago, on June 20, 1975, the movie JAWS was released. It is regarded as the first summer blockbuster and a landmark of Hollywood. It was also the breakout for director Steven Spielberg, who at just 27 years old, had mostly directed just television movies. Prior to 1975, movies didn’t advertise on television, which Jaws also changed. Jaws opened simultaneously in 465 theaters, unheard of at the time, but what is now standard practice. (Source: All the Right Movies)

Economic Review

• Imports Prices were flat in May after a slight unrevised +0.1% rise the prior month. Wall Street was expecting a -0.2% decline. Import Prices ex Petroleum were up +0.2%, down from +0.4% the prior month (unrevised). Year-over-year, the cost of imports was up +0.2%, above expectations for a flat reading and up from +0.1% the prior month (unrevised). Meanwhile, Export Prices were down -0.9%, below expectations for a -0.2% decline and up from the prior month’s unrevised +0.4%. Export prices decelerated to +1.7% over the past year, down from last month’s +1.9% annual rate (revised down from +2.0%).
• U.S. Industrial Production fell -0.2% for the month of May, below expectations for a flat reading and down from the prior month’s +0.1% increase (revised up from 0.0%). However, Manufacturing Production was up +0.1%, matching expectations and up from -0.5% the prior month (revised lower from -0.4%). Manufacturing represents about three-quarters of total Industrial Production. Year-over-Year, Industrial Production was up +0.6%, following the prior month’s +1.5% increase. Capacity Utilization slipped to 77.4% from an unrevised 77.7%, where it was expected to remain. Capacity Utilization reflects how much a manufacturing plant is being used to produce things.
• The Conference Board’s Leading Economic Index (LEI) slipped -0.1% in May to 99.0 from a downwardly revised -1.4% the prior month (originally reported at -1.0%). That was in line with Wall Street expectations. Breadth of the index was decent, with 6 of the 10 indicators tracking positive for the month, while 4 were negative. The decline was driven again by a sharp drop in Consumer Expectations of Business Conditions, which contributed the largest decline (-0.25) after contributing a -0.33 and -0.26 the prior two months. Consumers’ expectations have become continuously more pessimistic each month since January 2025. Like the prior month, manufacturing New Orders (-0.17) was the next largest negative contributor to the monthly decline. Stock Prices surged +0.33%, leading the positive contributors after being a -0.26 detractor the prior month. The LEI Coincident Index improved by +0.3, its seventh straight monthly improvement, after rising +0.1% the prior month. The LEI Lagging Index fell by -0.3%, offsetting the prior month’s +0.3% gain.
• The New York Fed’s Empire State Manufacturing Index, a gauge of manufacturing activity in the state, fell to -16.0 in June from -9.2 in May, well below the -6.0 reading expected. New Orders fell to -14.2 from +7.0, and Shipments fell to -7.2 from +3.5. The Inventories index remained positive at +0.9, but that was down from +4.8. However, forward looking indicators were optimistic with the index for Business Conditions Expected in Six Months jumping to +21.2 from -2.0 as future expected New Orders surged to +26.1 from -2.7 and future expected Shipments leapt to +23.0 from -3.4. The current inflation components broke a five consecutive month rising streak, with the Prices Paid indicator slipping to +46.8 from +59.0, although the Prices Received indicator rose to +26.6 from +22.9. 
• The Philly Fed Manufacturing Business Outlook Survey fell -4.0 in June, the same as the May contraction and worse than the -1.5 contraction Wall Street expected. That was far better than estimates for a rise to -11.0. Readings above zero indicate economic expansion. The indexes for New Orders rose sharply, breaking three straight months of declines. New Orders fell to +2.3 from +7.5 but Shipments improved to +8.3 from -13.0, breaking a four-week streak of declines. The Employment index fell to -9.8 from +16.5. The Average Workweek index was down to -1.6 from +2.0. Both inflation gauges declined, with Prices Paid and Prices Received down to +41.1 from +59.8 and +29.5 from +43.6, respectively.
• May Housing Starts sank -9.8% month-over-month to a seasonally adjusted annual rate of 1.256 million units, missing expectations for a -0.8% dip to 1.350 million units. That compares to a +2.7% increase, or 1.422 million units from the prior month (unrevised). Single-unit starts were up +0.4% to 924 million units, compared to 920 million units the prior month. Multi-family units sank -29.7% after being up +16.0% the prior month. Housing starts peaked at 1.8 million in April 2022. New construction single-unit starts were up +1.4% in the Midwest and +10.2% in the West, but were down -9.9% in the Northeast and -1.7% in the South. Building Permits, one of the leading indicators tracked by the Conference Board and indicator of future construction activity, were down -2.0% to an annualized rate of 1.393 million units. That was worse than the expected flat reading of 1.422 million units and compared to the prior month’s -4.0% decline to 1.422 million units. Single-unit permits dropped -2.7%, and multi-family units were down -0.8%. Regionally, single-unit permits were flat in the Midwest and down -2.4% in the South, -5.1% in the West, and -3.3% in the Northeast.   
• Homebuilder confidence fell again in June, as the National Association of Home Builders (NAHB) Housing Market Index (HMI) declined to 32 from 34 the prior month. That is the lowest level since December 2022. It was expected to rise to 36. A year ago, the index stood at 43. The index is based on a 0-to-100 scale, where any number over 50 indicates a good reading, and below 50 is considered negative sentiment. The Current Sales component fell to 35 from 37, while Sales Expectations in the Next Six Months slipped to 40 from 42, and Traffic of Prospective Buyers dipped to 21 from 23. For the month, 37% of builders reported cutting home prices, compared to 34% the prior month. That’s the highest level since 2022, when the survey started tracking this figure. The average price reduction was unchanged at 5%, where it’s been every month since last November. The use of sales incentives beyond price cuts ticked up to 62% from 61%.
• Weekly MBA Mortgage Applications fell -2.6% for the week ending June 13, following a +12.5 jump the prior week. The Purchase Index was down -3.0 after rising +10.3% the prior week. The Refinance Index slid -2.1% after rising +15.6% the prior week. The average 30-Year Mortgage Rate fell to 6.84% from 6.93% the prior week.
• Weekly Initial Jobless Claims were down -5,000 to 245,000 for the week ending June 13, matching expectations. The prior week was revised higher by +2,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell by -6,000 to 1,945,000 for the week ending June 7, worse than expectations for 1,941,000 claims. Last week’s reading was revised lower from 1,956,000 to 1,951,000.

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.