The U.S. stock market capped off an extraordinary week, with the S&P 500 surging 2.1% and the Nasdaq 100 climbing 2.3%, contributing to a stellar May that marked the index’s best monthly performance since 1990 with a 6.2% gain. Investors rode a wave of optimism fueled by easing trade tensions, robust corporate earnings, and signs of economic resilience, though lingering uncertainties around tariffs and inflation kept markets on edge.
A Tariff-Driven Rebound
The week’s rally was propelled by a temporary pause in President Donald Trump’s aggressive tariff policies, particularly the delay of a 50% tariff on European Union imports until July 9, 2025. This reprieve, announced over the weekend, sparked a broad market upswing, with growth-oriented sectors like technology and consumer discretionary leading the charge. The Russell 2000, a gauge of small-cap stocks, gained 1.82%, reflecting a risk-on sentiment among investors. “The market’s reaction to the tariff delay shows how sensitive valuations are to trade policy,” noted David Lefkowitz, UBS’s head of U.S. equities, who forecasts the S&P 500 reaching 5,800 by year-end.
However, trade concerns resurfaced late in the week after Treasury Secretary Scott Bessent described U.S.-China trade talks as “a bit stalled,” and Trump accused China of violating a preliminary trade agreement on his Truth Social platform. These developments tempered gains, with the S&P 500 slipping 0.6% and the Nasdaq 100 down 0.5% midweek before recovering.
Tech Titans and AI Lead the Way
Technology stocks were the standout performers, with Nvidia (NVDA) soaring 23% in May alone, buoyed by its blockbuster earnings that highlighted insatiable demand for AI chips. The chipmaker’s success lifted other AI-related stocks, including Palantir (PLTR, +8.13%) and Zscaler (ZS, +12.18%), which posted significant weekly gains. Costco Wholesale (COST) surged 33.71%, driven by strong consumer spending, while Ulta Beauty (ULTA, +14.9%) and Hologic (HOLX, +14.1%) also ranked among the week’s top performers.
Conversely, some stocks faced headwinds. Regeneron Pharmaceuticals (REGN) plummeted 17.9%, and Deckers Outdoor (DECK) fell 16.3%, reflecting sector-specific challenges in healthcare and consumer goods amid tariff-related supply chain concerns. The energy sector lagged, down 0.34%, as oil prices dipped, with West Texas Intermediate crude falling 0.03% to $60.90 per barrel.
Economic Signals and Policy Uncertainty
Economic data provided a mixed backdrop. The Conference Board’s Consumer Confidence Index rose to 98 in May, beating expectations of 88, signaling robust consumer sentiment. However, durable goods orders fell 6.3% in April, though less than anticipated. Inflation showed signs of cooling, with the core Personal Consumption Expenditures (PCE) index dropping to 2.5% year-over-year in April, down from 2.7% in March. Still, it remains above the Federal Reserve’s 2% target, reducing the likelihood of a June rate cut to just 2%, with markets pricing in two cuts for 2025, likely starting in September.
The Federal Reserve’s next moves remain a focal point, with upcoming data on manufacturing PMI, job openings, and the May employment report expected to shape expectations. “We’re still at the mercy of policy announcements, not just on trade but also on the budget,” said Liz Ann Sonders, Schwab’s Chief Investment Strategist.
As June begins, investors are bracing for a packed economic calendar, including the Employment Situation Report and earnings from companies like Broadcom and Lululemon. With tariffs set to resume in July unless trade deals materialize, and Nike’s upcoming earnings expected to reflect tariff impacts, volatility remains a risk. “This is a time for caution and balance,” said Stephen Wu of Carthage Capital Management, advocating for a market-neutral strategy that diversifies into healthcare and utilities.
For now, the market’s May momentum suggests resilience, but with valuations at a forward P/E of 21 and trade policy uncertainties looming, investors are advised to stay nimble. As Wu put it, “The first half of 2025 promises to be a wild ride.”
By: Montana Newsroom staff
