Market Recap – Friday, May 16, 2025
Stocks Close Higher, Capping a Strong Week
Stocks ended the day on a positive note, with the Dow, S&P 500, and Russell 2000 finishing higher. The Nasdaq, after six consecutive days of gains, ended lower but still posted impressive gains for the week. The Nasdaq rose more than 7% for the week, while the S&P 500 ended only about 3% below its record high in February. Big tech stocks like Tesla and Google were significant contributors to the gains. Other sectors that performed well included pharma/biotech, managed care, airlines, and homebuilders, while sectors such as energy, semiconductors, and China tech lagged behind.
Trade and Economic News:
There were few major headlines today, but US-China trade tensions remain a major topic. While there were no new updates on the trade front, President Trump mentioned that the US would set tariff rates for trading partners soon. He also indicated that multiple countries are seeking negotiations, but he expressed concerns about the bandwidth to handle all requests. Positive signals from Trump's Middle East trip were also taken positively by the market, particularly regarding AI developments.
Consumer Sentiment:
Consumer sentiment data for May showed weaker-than-expected results, with inflation expectations at their highest since the 1980s. While the sentiment index was low, this data was collected before the US-China trade deal last weekend, which could provide a more positive outlook going forward. Other economic data points, including housing starts and building permits, came in lighter than expected, signaling a slowdown in the housing market.
Corporate Earnings:
Several companies made notable announcements today. Walmart reported better-than-expected earnings and reaffirmed its full-year guidance, but warned that consumers may start seeing higher prices due to tariff pressures. Meta Platforms announced a delay in the rollout of its AI model due to performance concerns. On the M&A front, Charter Communications confirmed its $34.5 billion acquisition of Cox Communications.
Here's Our Take:
The market remains influenced by ongoing trade negotiations and the impact of tariffs. While the US-China trade de-escalation is providing optimism, challenges still remain, including uncertainties around tariff rates and trade agreements. Consumer sentiment remains weak, with inflation expectations rising, signaling a cautious outlook for the economy.
Despite the mixed economic data, certain sectors like pharma, airlines, and homebuilders showed solid performance, and big tech continues to lead the charge. However, energy and semiconductors faced headwinds, reflecting the broader market's cautious approach. As always, staying diversified is key, and investors should monitor upcoming earnings reports and economic data, particularly consumer sentiment and retail sales, to gauge future market directions.
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