Market Recap – Friday, June 27, 2025

Trade Optimism, AI Growth, and Fed Policy Expectations Fuel Market Gains

Stocks ended on a positive note, with the S&P 500 and Nasdaq both logging fresh record highs, contributing to a strong weekly gain. The rally was driven by strength in various sectors, including apparel, aerospace, homebuilders, airlines, and asset managers. While energy and pharma stocks lagged, the broader market benefited from positive sentiment surrounding trade negotiations, economic data, and AI growth narratives.

Trade and Policy Developments:
Geopolitical tensions eased, with the US and China confirming a trade framework on rare earths. The White House also signaled more flexibility on trade deadlines, with a major deal expected before Labor Day. Meanwhile, concerns about the US Federal Reserve’s monetary policy remain a key focus, with political pressure mounting for a rate cut and a split in Fed officials’ views on the timing.

Economic Data:
Key economic reports included May core PCE inflation, which rose 0.2%, slightly higher than expected, and personal income and spending data showing slight declines. Consumer sentiment data also showed an improvement in June, although concerns about the labor market persist.

Corporate Earnings:
Nike reported better-than-expected earnings and guidance, fueling optimism in the retail sector. Other notable gains came from Micron and Acuity Brands, with AI and defense sector growth driving their respective stock rallies.

Geopolitical and Economic Themes:
The market remains cautiously optimistic, with AI growth, trade deal optimism, and Fed rate cut expectations providing a positive backdrop. However, weaker-than-expected consumer confidence and concerns about the labor market could continue to weigh on sentiment in the coming weeks.

Here’s Our Take:

Despite the volatility in energy and some macroeconomic uncertainty, the broader market remains resilient, buoyed by AI-driven growth, easing geopolitical tensions, and expectations of dovish Fed action. As we head into next week, the market's attention will likely continue to focus on trade developments and the Fed’s policy stance, particularly with the upcoming payrolls report and the potential for rate cuts later this year. While there are some bearish risks in the housing and labor markets, the overall sentiment remains positive as investors look to capitalize on the long-term growth narrative, particularly in sectors like AI, tech, and consumer goods.

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