Weekly Market Update – May 30, 2025

Quick Takes

• Most major stock and bond indexes managed to rebound from the prior week’s pullback. Better than expected economic reports on consumer confidence and sentiment, upward revisions to U.S. GDP growth, and benign inflation all helped buoy investor confidence.
• U.S. stocks finished the final week of May with gains. For the week, the S&P 500 was up +1.9%, the tech-heavy Nasdaq Composite gained +2.0%, while the small cap Russell 2000 Index trailed but still advanced +1.3%.
• Treasury bond yields declined across the yield curve on the positive economic data and strong bond auction demand. The 30-year U.S. Treasury bond yield fell back below 5% and the Bloomberg U.S. Aggregate Bond Index gained +0.9%, breaking a four-week losing streak.

Source: Bloomberg. Data as of May 30, 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 rise even as trade policy still dominates headlines

It was a holiday-shortened week and the final week of the month of May. But the storyline didn’t change dramatically as trade policy continued to garner the spotlight. Even so, major stock indexes managed to rebound from the prior week’s pullback. Better than expected economic reports on consumer confidence and sentiment, U.S. GDP growth and inflation helped to overcome some selling pressure on Friday after comments by Treasury Secretary Scott Bessent about U.S.-China trade talks being “a bit stalled,” as well as social media comments from President Donald Trump suggesting that China had “violated” its preliminary agreement with the U.S. The week started on a high note following a weekend announcement from President Trump that he would delay the introduction of a new 50% tariff on imports from the European Union—announced two days prior—until July 9, and that negotiations between the trading partners would be “fast-tracked.” Later in the week, the U.S. Court of International Trade ruled that President Trump did not have the authority to impose the vast majority of the global tariffs that have been implemented since the start of his second term, sending stocks sharply higher on Thursday morning; however, the Trump administration quickly appealed the ruling, and a federal appeals court put a temporary hold on the ruling Thursday evening, which quickly dampened investor sentiment. For the week, indexes finished below their best levels but still managed to make solid gains. The tech-heavy Nasdaq Composite led the way, gaining 2.01%, with the S&P 500 Index close behind, up +1.88%, but smaller-cap stocks lagged with the Russell 2000 Index up a still-decent +1.3% return.

In terms of economic data, an unexpected sharp improvement in the Consumer Confidence Index (detailed in the Chart of the Week below), an upward revision to the second estimate of growth in first quarter Gross Domestic Product (GDP), a positive surprise in the final reading of the May University of Michigan Consumer Sentiment Index, and a move down in the April core Personal Consumption Expenditures (PCE) Price Index—widely considered the Federal Reserve’s preferred inflation gauge.

Outside of trade and economics, Nvidia, the world’s second-largest company by market valuation, also helped buoy the stock market with another impressive quarterly earnings report. The company reported another quarter of stronger-than-expected revenue and earnings, as well as positive guidance, with global demand for Artificial Intelligence (AI) infrastructure remaining strong, despite a late-week announcement that the U.S. may restrict sales of software used to design semiconductors to China.

Minutes from May’s meeting of the Federal Open Market Committee (FOMC) showed how Fed policymakers are navigating a quickly evolving economic landscape. The decision to keep the fed funds rate unchanged at May’s meeting was unanimously supported. Notably, FOMC staff considered the risk of recession nearly as likely as their baseline forecast. However, May’s FOMC meeting took place before the U.S.-China trade truce was announced. The de-escalation is unlikely to have materially changed policymakers’ view that inflation risks have risen, though recession risks have likely eased. The bottom line from the minutes is that the Fed clearly views that a June rate cut is off the table.

With all that in the background, U.S. Treasury yields dipped over the week, with auctions of two-, five-, and seven-year notes all being met with solid demand. The benchmark U.S. 10-year Treasury yield ended the week down -11 basis points at 4.40%. The long end of the yield curve declined similarly with the 30-year Treasury bond yield off -11 basis points to finish back below 5% at 4.93%. The 2-year yield dropped -9 basis points to 3.90%. Bond prices rise when yields fall, and the Bloomberg U.S. Aggregate Bond Index gained +0.9%, breaking a four-week losing streak.

Overseas, the MSCI EAFE Index (developed market non-U.S. stocks) was up +0.8% last week. European stocks were up on the news that the U.S. would give the European Union more time to negotiate a trade deal before 50% tariffs take effect. Also helping was a slowdown in inflation in France, Spain, and Italy. Japan’s stock markets also rebounded over the week, encouraged by a constructive telephone call on Thursday between Prime Minister Shigeru Ishiba and President Trump ahead of the fourth round of tariff negotiations in Washington. 

The MSCI Emerging Markets Index was the conspicuous loser of the week, falling -1.2%. Chinese stocks fell again as the U.S.-China trade truce seemed to face challenges and potential restrictions of sales of U.S. software used to design semiconductors to China.

The Week Ahead

The May Employment Report, to be released on Friday, will be the highlight of the economic calendar this week. Nonfarm payrolls have increased by an average of 144,000 a month this year, compared to 192,000 in 2023 and 2024. According to Bloomberg, consensus estimates are for nonfarm payrolls to be 125,000 and for the unemployment rate to remain at 4.2%. 

Other economic indicators that will merit attention are the ISM Manufacturing PMI (on Monday) and the ISM services PMI (on Wednesday). On Tuesday, the Job Openings and Labor Turnover (JOLTS) report is released along with Factory Orders. Construction Spending is due Monday, and Consumer Credit is Friday.

Regarding central bank activity, Fed Reserve Chairman Jerome Powell is scheduled to deliver remarks on Monday, and across the pond, the European Central Bank (ECB) is expected to cut rates again on Thursday, the eighth such rate cut since last June.

Chart of the Week

The Conference Board’s Consumer Confidence Index jumped to 98 in May, breaking a five-week skid for the index. That is a sharp improvement from the 85.7 reading in April, which was the lowest level since April 2020 (revised down from the originally reported 86.0). That was above Wall Street expectations for an increase to 87.1. The Present Situation gauge increased to 135.9 from 131.1 (which was revised lower from the originally reported 133.5). The Expectations gauge — which reflects consumers’ six-month outlook — surged to 72.8 from 55.4 the prior month (revised higher from 54.4). Sustained levels below 80 on the expectations index can signal a recession within the next year, while in good times the index can top 120 or more. Responses showed optimism regarding investing, with 44% now expecting stocks to be higher over the next 12 months, up +6.4 percentage points from April. Views on the labor market also improved, with 19.2% of respondents expecting more jobs to be available in the next six months, compared with 13.9% in April. At the same time, 26.6% expect fewer jobs, down from 32.4%. The level of respondents saying jobs were “plentiful” edged higher to just 31.8%, but those saying employment was “hard to get” increased to 18.6%, up +1.1 percentage points. Survey officials said sentiment improved across age, income, and political affiliation, though noting that the “strongest improvements” came from Republicans. While consumers were more positive about current business conditions, “The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards,” said Stephanie Guichard, the Conference Board’s senior economist for global indicators. 

Consumer Confidence Rebounds on Easing of U.S.-China Trade Tensions

Consumer Confidence Index

Source: The Conference Board; NBER. Shaded areas represent periods of recession.

Did You Know?

THE MORTGAGE BALL AND CHAIN – 62% of all outstanding mortgages have yields of less than 4%. California, Utah, and North Dakota have the highest share of sub-4% mortgages (71%), but in all 50 states, at least half of outstanding mortgages have rates of less than 4%. (Source: Bloomberg)

AND THEN THERE WERE NONE – On May 16, Moody’s became the third of the three major ratings agencies to downgrade the AAA credit rating of the US. Since the first downgrade by Standard & Poor’s in August 2011, the S&P 500 has posted an annualized gain of +14.4%. (Source: Bespoke)

LESS FUN IN THE BUDGET – 54% of US adults expect to spend less on travel, dining out, or entertainment this year compared to 49% last year. Declines in spending plans are correlated to age, as Gen X and Baby Boomers are the most likely to spend less across all three categories. Gen Z has the smallest share of members expecting to spend less. (Source: Bankrate)

This Week in History

VANDERBILT B-DAY – On May 27, 1794, Cornelius Vanderbilt was born on a farm in Staten Island, N.Y.  He started off in the steamboat business but later moved into railroads, building the New York Central into one of the world’s dominant businesses. Vanderbilt died as the world’s richest man in 1877 with a $105 million fortune. (Source: The Wall Street Journal)

Economic Review

• The final reading of the April University of Michigan Consumer Sentiment Index improved to 52.2 from the preliminary reading of 50.8 two weeks ago, beating expectations for a 51.5 reading and unchanged from the prior month. The Current Economic Conditions component rose to 58.9 from the preliminary reading of 57.6, but down from 59.8 the prior month. The Consumer Expectations component was up to 47.9 from the initial estimate of 46.5 and up from the prior month’s final reading of 47.3. One-year inflation expectations slipped to 6.6% from the preliminary reading of +7.1% and are down from +7.3% from the previous month. The five-year inflation expectations declined to 4.2% from the 4.6% in the preliminary reading and the prior month. “Sentiment had ebbed at the preliminary reading for May but turned a corner in the latter half of the month following the temporary pause on some tariffs on China goods,” said survey director Joanne Hsu. “Expected business conditions improved after mid-month, likely a consequence of the trade policy announcement.”
• The cost of goods and services barely rose in April, matching expectations at +0.1%, and up from a flat 0.0% the prior month (unrevised). For the year, the Personal Consumption Expenditure (PCE) Deflator (aka PCE Price Index) was up +2.1%, below expectations for +2.2%, and down from the +2.3% annual rate the prior month (also unrevised). The Core PCE Price Index, which excludes food and energy and is the Fed’s preferred inflation gauge, was also just +0.1% for the month, in line with expectations and the prior month (after being revised up from 0.0%). Year-over-year, the Core-PCE Price Index was up +2.5%, matching expectations, and down from +2.7% (revised higher from the originally reported +2.6%).  
• Personal Spending slowed to +0.2% in April, right in line with expectations but down from +0.7% the prior month (unrevised). However, after adjusting for inflation, Real Personal Spending inched up +0.1% for the month, above expectations to be flat (0.0%) but down sharply from +0.7% the prior month (unrevised). The results seem to show a cautious U.S. consumer as households reined in spending during the on-and-off tariff uncertainty in April after the spend ahead of tariffs in March. Still, the current level of spending is sufficient to keep the economy expanding, especially when coupled with the strong income growth that occurred in April. Personal Income rose +0.8%, nearly three times the expected +0.3%, and up from a positively revised +0.7% the prior month (originally reported at +0.5%). It was the third month of solid wage growth. Real Disposable Income was up +0.8% month-over-month, and up +5.2% year-over-year. The Personal Savings Rate jumped to +4.9% from +4.3% the prior month, which is the highest level in almost a year. 
• The U.S. economy slowed slightly less than originally estimated in the first three months of 2025. The third and final estimate of real Gross Domestic Product (GDP) for Q1 2025 was revised higher to -0.2% from the previous estimate of -0.3%, which is where Wall Street expected it to stay. The economy officially shrank for the first time in three years as a result of surging imports that pushed the trade deficit to record highs. Trade deficits detract from GDP. The record trade deficit in March shaved a substantial -4.9 percentage points off GDP. GDP will likely rebound materially in the second quarter after President Trump relaxed and extended many of the tariffs to allow for negotiations. Economists forecast GDP to expand around +2% for this quarter. The GDP Price Index (GDP Price Deflator) was unchanged from the prior estimate of +3.7% as expected. Consumer spending, the main engine of the economy, rose less than expected with Personal Consumption Expenditures (PCE) reported at a +1.2% annual pace, down from the prior estimate of +1.8% and shy of Wall Street consensus estimates for it to improve to +1.7%. At +3.1%, Government Spending also dipped and detracted from GDP after being a larger-than-average contributor for several quarters. The Personal Saving Rate rose to 4.3% from 3.8% in the prior quarter and 4.1% in the third quarter. 
• The Commerce Department reported Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment slid -6.3% in April, almost entirely due to the volatile commercial aircraft category, which was grounded after surging in March when airlines front-ran anticipated tariffs. Wall Street was actually expecting an even bigger decline of -7.8%. The prior month was revised down from the originally reported +9.2% down to +7.6%. Durable Goods Orders Excluding Transportation were up a slight +0.2%, above expectations for a flat reading and above the prior month’s -0.2% (revised down from 0.0%). The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, was down -1.3%, well short of expectations for a -0.2% dip and down from +0.3% the prior month (revised up from +0.1%). Core Capital Goods Shipments, which are factored into GDP, slid -0.1%, matching expectations but down from +0.5% the month before (revised up from +0.2%). The bottom line from the report is that there was a big drop in business spending as the ever-changing landscape of tariffs made it difficult for businesses to plan, invest, and hire.
• The Texas Manufacturing Outlook Survey showed Texas factory activity improved in May but remains at negative levels. The General Business Activity index rose to -15.3 from an unrevised -35.8 the prior month. That was far better than expectations for a -23.1 reading. It was at a three-year high of +14.1 in January. The Production index, a key measure of state manufacturing conditions, was down again to +0.9 from +5.1, but New Orders improved to -8.7 from -20.0, and Shipments rose to +0.5 from -5.5. The Company Outlook index also improved to -11.3 from -28.3. Employment moved back to positive at +3.5 from -3.9. On inflation, Prices Paid declined to +40.7 from +48.4, and Prices Received rose to +15.1 from +14.9. Indicators of conditions six months from now improved significantly. The Texas Service Sector Outlook Survey improved for the month too, rising to -10.1 from -19.4 the prior month (unrevised).  
• The Richmond Fed Manufacturing Survey rose to -9 in May from -13 the prior month, in line with expectations. The disappointing April was the result of all three component indexes dropping and remaining in contraction territory. The New Orders and Shipments components both rose to -10 from -14 prior month. The component fell to -17 from -7. The Employment index edged up to -2 from -5. The future indexes for activity six months from now were mostly higher as well, with several components up substantially. The Richmond Fed Service Sector Survey improved to -18 from -30 the prior month, which was the lowest level since July 2022.
• The Chicago Purchasing Managers Index (PMI), a barometer for the Chicago region’s business and manufacturing conditions (also known as the Chicago Business Barometer), fell to 40.5 in May from an unrevised 44.6 the prior month. That was well below Wall Street expectations for a 45.0 reading. Readings below the 50 level indicate contraction, and it has been in contraction territory for 18 consecutive months now. Five of the seven sub-components fell and signal contraction, while just two rose and signal expansion. The decline was led by a fall in New Orders, Order Backlogs and Production. However, Employment and Supplier Deliveries increased.
• The National Association of Realtors (NAR) reported that Pending Home Sales sank -6.3% in April after last month’s +5.5% jump (revised lower from +6.1%), which was far below Wall Street expectations for a -1.0% decrease. Year-over-year sales were down -3.5%, also well short of expectations for a +2.7% annual rate and down from -0.7% the prior month (revised down from -0.1%). From a regional perspective, the Midwest was down -5.0%, the South dropped -7.7%, the West fell -8.9%, and the Northeast saw a modest dip of -0.6%.
• According to the Case-Shiller S&P CoreLogic 20-City Home Price Index, U.S. housing prices declined -.12% in March, marking the first monthly decline since January 2023. That was far short of expectations for a +0.30% increase and down from an unrevised +0.40% increase the prior month. On a year-over-year (YoY) basis, the 20-city index was up +4.07%, below expectations for +4.50% and down from the prior month’s +4.53% annual pace (revised higher from +4.50%). Of the 20 cities tracked by the index, 13 fell over the month, and San Francisco was the weakest-performing market. Annual house price appreciation was the strongest in New York and Chicago.
• The competing Federal Housing Finance Agency (FHFA) House Price Index (HPI) also showed U.S. home prices decline in March, with the index slipping -0.1 after being flat the prior month (revised down from +0.1%). Wall Street was expecting a +0.1% rise. The government data showed home prices up +3.7% year-over-year, down from +3.9% the prior month. House prices were up YoY in all of the 9 regions, but mixed for the month-over-month comparison. The housing market is weakening amid low housing affordability and rising economic uncertainty.
• Weekly MBA Mortgage Applications fell -1.2% for the week ending May 16, following a -5.1% drop the prior week. The Purchase Index was up +2.7% after falling -5.2% the prior week. The Refinance Index dropped -7.1% after declining -5.0% the prior week. The average 30-Year Mortgage Rate rose to 6.98% from 6.92% the prior week, the highest since Jan 24.
• Weekly Initial Jobless Claims rose +14,000 to 240,000 for the week ending May 23, worse than expectations for 230,000. The prior week was revised lower by -1,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose by +26,000 to 1,919,000 in the week ending May 16, worse than expectations for 1,893,000 claims. Last week’s reading was revised lower from 1,881,000 to 1,867,000.

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.