Stocks provided a mirror image of the prior week’s drubbing as strong gains were led by a drop in interest rates and bullish earnings from Nvidia (NVDA). As noted previously, “our sense of the current environment is one where the stock market as well as interest rates remain somewhat rangebound, supported by a modestly growing economy, low unemployment and the possibility of ending the trade war but kept from bolting higher as investors worry that these negotiations may take longer than expected and the yet to be determined economic impact from President Trump’s unconventional relationship with our allies and adversaries, alike. Simply put, the market is biding its time to see how things play out.”
· The “Tariff-Go-Round” continues. On Wednesday, the U.S. Court of International Trade blocked the reciprocal tariffs previously implemented by the Trump Administration. In doing so, the three-judge panel stated that “The Worldwide and Retaliatory Orders exceed any authority granted to the President by IEEPA [International Emergency Economic Powers Act] to regulate importation by means of tariffs.” Within hours, the U.S. Court of Appeals for the Federal Circuit “temporarily stayed until further notice” the ruling by the U.S. Court of International Trade “while this court considers the motions papers.”
According to economists at Goldman Sachs, in their opinion “the administration could quickly replace the 10% across-the-board tariff with a similar tariff of up to 15% under Section 122,” of the Trade Act of 1974. It is important to note that should the Trump Administration follow this route, it would last for up to 150 days after which such tariffs would require Congressional approval.
· Trump and Powell pow-wow. President Trump and Fed Chair Jerome Powell this past Thursday. At its conclusion, both men had comments, President Trump through his Press Secretary Karoline Leavitt. “The president did say that he believes the Fed chair is making a mistake by not lowering interest rates, which is putting us at an economic disadvantage to China and other countries and the president’s been very vocal about that, both publicly and now I can reveal privately as well.”
The Fed also put out the following statement. “Chair Powell said that he and his colleagues on the FOMC will set monetary policy, as required by law, to support maximum employment and stable prices and will make those decisions based solely on careful, objective, and non-political analysis.”
· According to data from global energy giant Baker Hughes, the number of drilling rigs in the United States fell by three to 563, the fifth consecutive weekly decline. This marked the lowest level since November 2021. Generally speaking, as energy prices fall, the number of operational rigs will follow.
· “The Waiting,” a song from one from our favorite singers, Tom Petty, contains the following refrain – “The waiting is the hardest part. Every day you see one more card. You take it on faith, you take it to the heart. The waiting is the hardest part.” This might be how investors feel as through the first five months of 2025 the S&P 500 has risen just 0.51% while the U.S. Total Market Index has dropped a mere 5.95 points to 58,393.30 a loss of just -0.01%.
It’s The Economy…”
· The Bureau of Economic Analysis reported that Personal Income rose 0.8% during April (5.5% y/y), after rising 0.7% in March. Disposable Personal Income (personal income less taxes) rose 0.8% (5.2% y/y), after rising 0.7% during March. Adjusted for inflation, real disposable personal income rose 0.7% during April (2.9% y/y), after rising 0.7% in March. The Wage & Salary Component rose 0.5% in April (4.6% y/y), after rising 0.5% in March. Personal Consumption Expenditures (PCE), representing approximately 70% of economic activity, rose 0.2% during April (5.4% y/y) after rising 0.7% during March. Personal Savings (Disposable Personal Income Less Outlays) rose to an annualized rate of 4.9% during April from 4.3% during March. The PCE Chain Price Index rose 0.1% in April (2.1% y/y) after remaining unchanged during March. Excluding food and energy, the Core PCE rose 0.1% during April (2.5% y/y), after rising 0.1% during March. (Source, Bureau of Economic Analysis)
· First Quarter Gross Domestic Product (first revision), as reported by the Commerce Department, a tally of the output of all goods and services in the United States, fell at a revised annualized rate of 0.2%, better than the initially reported -0.3%, down from 2.4% during Q4 and as compared to 2.1% y/y. Final Sales to Domestic Purchasers rose at a revised annual rate of 2.0%, during Q1, below the initial 2.3%, after rising 3.0% in Q4 and by 2.8% y/y. Government Spending fell at an annualized rate of 0.7% during Q1, revised from -1.5%, down from 3.1% during Q4 and as compared to 2.6% y/y. Inventory Effect added 2.64 percentage points during Q1 as compared to -0.84 during Q4. The GDP Chain Price Index rose at an unrevised annual rate (SAAR) of 3.7% during Q1 (2.6% y/y) versus 2.3% during Q4. The PCE Price Index Excluding Food and Energy rose at a revised annualized rate of 3.4% during Q1 (2.8% y/y), slightly below the initially reported 3.5%, but above the 2.6% rate during Q4. (Source, U.S. Bureau of Economic Analysis)
· The Conference Board’s Consumer Confidence Index rose to 98.0 (-3.3% y/y) during May from 85.7 in April. The present situation index rose to 135.9 in May from 131.1 (-3.5% y/y) while the expectations component surged 31.4% to 72.8 during May
from 55.4 during April (-2.8% y/y), bouncing off its lowest level for the latter since October 2011. Those surveyed saying that jobs are “hard to get” rose to 18.6% of respondents during May as compared to 17.5% in April while those claiming that jobs were “plentiful” rose to 31.8% of consumers from 31.2% during those same months.
Economic Reports scheduled to be released this week include the following: on Tuesday, April Factory Orders and the Job Openings and Labor Turnover Survey (JOLTS); on Thursday, the Weekly Report of Initial Claims for Unemployment Benefits along with the April Balance of Trade; and, on Friday, May Non-Farm Payroll Report, May Unemployment and April Consumer Credit.
Q1-2025 Earnings Season Has Begun To Wind Down. Nonetheless, several companies of note are scheduled to report, to include Campbells (CPB), CrowdStrike Holdings (CRWD), Hewlett Packard Ent (HPE), Dollar General (DG), HealthEquity (HQY), Dollar Tree (DLTR), MongoDB (MDB), DocuSign (DOCU) and Broadcom (AVGO).