Closing Recap

Friday, May 30, 2025

US equity futures faded modestly overnight, then slipped a bit more after a Trump comment indicating China has already violated its agreements with the US. These types of headlines just create a new wave of uncertainty in the market and give people a reason to take profits while they wait to see how the tariff situation plays out. With Core PCE coming in right in line with expectations, the data provided a small relief bounce, but futures held onto modest declines into the open. On a sentiment basis, today’s Fear and Greed Index registered a 61/100 (Greed) versus 63/100 (Greed) last week and big jump from 42/100 (Fear) last month. Consistent with the bullish sentiment, US equity futures had recouped most of the early decline by mid-morning and were holding just slightly in the red. Early breadth favored decliners by almost 2:1 as small caps underperformed with IWM versus SPY and QQQ. Consumer Staples, Utilities and Consumer Discretionary were early outperformers among S&P sector ETFs, while Technology, Materials and Energy led the underperformers with four sectors gaining versus seven declining.

In noteworthy data today, the Atlanta Fed GDPNow model of real GDP growth for Q2 now stands at 3.8%, up from 2.2%. Though Core PCE was in-line today at +0.1% mo/mo, the Supercore PCE mo/mo turned negative for the first time since Covid, prompting some to once again voice views the Fed is behind on rate cuts. On Costco earnings, @bespokeinvest notes the stock, while generally strong over time, was on pace to gap down on earning for the 12th time in the past 14 quarters. On trade and tariffs, @KobeissiLetter notes US goods imports fell 19.8% in April, marking the biggest drop in history for US goods imports. Lastly, on market performance, @RyanDetrick notes this could be the best month of May for the S&P 500 since 1990 if the rest of the day holds up, with the index currently +6.0% versus +5.9% in 1997.

Heading into the final hour of trading for the month, following a mid-day slide on headlines noting the US plans wider tech sanctions on China subsidiaries then a later, more positive Trump comment on China tariffs, futures remained modestly lower. Breadth improved slightly to 3:2 still in favor of decliners as small-caps closed the intraday under-performance gap. Sector performance flip-flopped to seven gaining versus four, declining with Consumer Staples (+1.15%), Utilities (+0.87%) and Health Care (+0.5%) outperforming, while Consumer Discretionary (-0.20%), Technology (-0.40%) and Energy (-0.9%) were the largest underperformers. On a growth versus value basis, only value was looking to finish the month on an up note. The Russell 1000 Value was gaining +0.09% versus its Growth counterpart at -0.14%.

Market volatility was at its finest early afternoon as stocks fell following a report that a trade truce between the U.S. and China is at risk of falling apart as China’s slow walking on rare-earth exports fuels U.S. recriminations that China is reneging on the deal, according to the WSJ this afternoon. Chinese Vice Premier He Lifeng agreed to the demand U.S. demand that Beijing resume rare-earth exports in return for the U.S. agreeing to a 90-day tariff truce during talks in Geneva earlier this month, but since then Beijing has continued to slow-walk approvals for export licenses for rare earths and other elements needed to make cars, chips and other products according to the report.

Market totals: For the week, the S&P 500 gained 1.88%, the Nasdaq climbed 2.01%, and the Dow climbed 1.6%; for the month the S&P 500 gained 6.15%, the Nasdaq climbed 9.56%, and the Dow climbed 3.94%. The S&P 500, Nasdaq, registers biggest monthly percentage gain since November 2023, the S&P 500 records strongest May performance since 1990 and the Nasdaq posts its best May percentage gain since 1997.

• April overall PCE price index m/m rises +0.1% (in-line with consensus +0.1%) vs March unchanged, while April core PCE price index m/m also rises +0.1% (vs. consensus +0.1%) and vs March +0.1% (prev unchanged).
• April personal income +0.8% above consensus +0.3% and vs March +0.7%
• April Personal Spending climbs 0.2% m/m; in-line with est. +0.2%
• U.S. Goods Trade Balance increased to -$87.62 billion in April… a record change.
• U.S Chicago PMI for May actual reading was weaker at 40.5 vs 44.6 previously and below the estimate 45.1.
• University of Michigan surveys of consumers sentiment final May 52.2 above consensus 51.0 and vs preliminary May 50.8 and final April 52.2; current conditions index final May 58.9 vs prelim May 57.6 and final April 59.8 and expectations index final May 47.9 vs prelim May 46.5 and final April 47.3
• University of Michigan surveys of consumers 1-year inflation outlook final May tumbles to 6.6% vs prelim 7.3% and final April 6.5% and the 5-year inflation outlook final falls to 4.2% vs prelim 4.6% and final April 4.4%

• WTI July crude futures gained slightly overnight but could not hold on early following Trump China tariff comments. Expectations of OPEC+ production increases in July also pressured prices into the afternoon, especially as US gasoline demand has been lagging heading into, “driving season.” Late comments from Trump on China tariff issues were more encouraging, prompting a small rally which wasn’t enough to push oil back to positive territory. July crude futures finished the session down $0.15/bbl, or -0.25%, at $60.79. Brent crude also slipped by $0.25/bbl, or -0.39%, to $63.90.
• The 10-year yield rose 24.5 bps to 4.418% this month, its largest one-month yield gain since Dec. 2024, while it was down about 9 bps on the week, snapping a four-week streak of rising yields; the 2-yr yield rose 29.5bps on the month to settle at 3.914%, its biggest one month gain since October 2024 and down 7.1bps on the week; the 30-yr yield rises 25.2bps in May to 4.931%, now up 5 of the last 6 months, but fell -10.5bps this week.

• In Apparel Retail: GAP shares tumbled after the company reported solid quarterly results and maintained its outlook for the year but predicted a tariff impact of up to $300 million and revealed weakness at Banana Republic and Athleta. AEO posted a wider Q1 EPS loss of (-$0.29) and pulled its FY guidance earlier this month, citing an uncertain economy, and said it was writing off $75M in Spring/Summer merchandise.
• Ahead of earnings in discount retailers next week, Piper said it continues to most favor OLLI and remain Neutral on the dollar stores (DG and DLTR). For Tariff Exposure, DLTR has the most direct import exposure of the dollar stores at 40% of sales vs DG with 4% of purchases at cost imported internationally, while for OLLI, it has 15% direct exposure to China, with an undisclosed percent from other countries as well.
• In Hardlines/Warehouses: COST bounced after Q3 adj EPS of $4.28 topped the $4.24 consensus while same-store sales increased 5.7% from a year prior, this came in slightly below consensus of 6%; CEO noted the warehouse chain had pulled forward summer orders in the U.S. to mitigate the effect of tariffs.
• In Restaurants: RRGB shares jumped as Q1 results showed solid execution and improving operations, though management maintained a cautious outlook amid consumer softness; 2025 revenue guidance was lowered (to $1.21B-$1.23B from $1.225B-$1.25B) but EBITDA and restaurant margin guidance remained steady.

• In Leisure Products: DOOO was upgraded to Buy from Hold with C$78 PT at Desjardins saying overall, they were impressed with management’s execution in Q1 (inventory network down 21% YoY, flat retail performance in Q1, solid FCF generation, lower-than-expected impact from tariffs) and encouraged by comments for Q2. DOOO was also upgraded to Buy at Stifel post results, improving outlook.

• In Aerospace & Defense: PLTR shares advanced; the New York Times reported The Trump administration has expanded Palantir’s work with the government, spreading the company’s technology — which could easily merge data on Americans — throughout agencies
• In Industrials & Machinery: AGCO was downgraded to Neutral from Buy at Citigroup as thinks 2025 being the trough of the cycle for global ag machinery is coming into focus but think it will take some time for OEMs to reach its mid-cycle earnings estimates. CNH was Citi’s lone Buy rating amongst its coverage, reinforced by its mid-cycle analysis which suggests solid upside. NDSN was upgraded to Outperform from Perform at Oppenheimer with a $260 price target after results saying the company is emerging from a relatively nettlesome layering of cyclical headwinds. ROK upgraded to Overweight from Equal Weight with a price target of $350, up from $283 at Barclay’s and raises its estimates amidst outsized ‘reversion’ / earnings upside potential as its top-line recovers.
• In Chemicals: Keybanc noted Chemical Market Analytics (CMA) released its monthly chlor-alkali report, showing stability in domestic caustic soda prices (OLN, WLK most impacted). The U.S. caustic soda index rolled over in May, in line with CMA’s forecast. They view the settlement as positive following the $20/ton increase recorded in April. For now, caustic soda prices remain elevated given soft demand for chlorine due to weak Durables and construction markets. For June, CMA still expects prices to fall $5/ton. TROX was upgraded to Overweight from Neutral at JP Morgan saying they think that TiO2 prices are likely to move higher either in Q2:25 or in Q3:25 after a two-year period of decline. LYB was downgraded to Hold from Buy at Argus, noting with the company’s global exposure, they believe shares will continue to face uncertainty in the coming quarters over looming tariff threats and recent financial results have been lackluster at best.

• REGN and SNY shares fell after saying Itepekimab met primary endpoint in one of two COPD Phase 3 trials; AERIFY-1 trial met the primary endpoint of significantly reducing moderate or severe acute exacerbations by 27% compared to placebo at week 52; said AERIFY-2 Phase 3 trial did not meet the primary endpoint.
• RHHBY announced new 96-week data for fenebrutinib demonstrating that patients with relapsing multiple sclerosis (RMS) maintained no disability progression and low levels of disease activity for up to two years.
• SMMT said topline results from the Phase III clinical trial, HARMONi, the first global Phase III study evaluating ivonescimab, successfully met the progression-free survival (PFS) primary endpoint and showed a positive trend in the other primary endpoint, overall survival (OS). STAT News noted the drug delayed the progression of lung cancer in patients from the U.S. and other Western countries consistent with prior results reported from patients enrolled from China, but ivonescimab has not yet demonstrated a survival benefit.

• In Internet Security Software: ZS shares bounce early after reported better than expected FQ325 results, with non GAAP EPS of $0.84 (consensus $0.76) on revenue of $678.0M (consensus $667.0M), up 23% y/y, billings growth of 25% y/y (consensus 21% y/y), and issued upbeat guidance FY25 non-GAAP EPS of $3.18-$3.19 (consensus $3.09) on revenue of 2.659B-$2.661B (consensus $2.651B), reflecting 23% y/y growth.
• In Hardware & Components: DELL reported mixed Q1 results as adj EPS missed due to modest tariff impacts to CSG margins and slightly weaker growth from ISS, but total revenue was slightly above due to better PCs on modest pull-forward while AI server orders of $12.1B were well above expectations, as was the ending backlog of $14.4B and full-year guidance raised to $9.40 from $9.30 on EPS
• In Gaming Software: Unity Software (U) was upgraded to Buy at Jefferies and raised tgt to $29 from $22 based on the view that the improved Vector ad model can drive accelerating revenue growth in FY26 and beyond and believes the risk-reward is favorable as it sees potential for significant EBITDA upside.
• In Storage: NTAP shares slid after Q4 EPS and sales slightly topped consensus expectations, but issued weaker guidance as sees Q1 revs $1.455-1.605B vs est. $1.61B and adj EPS $1.48-1.58 vs est. $1.65; sees FY revs $6.625-6.875B vs est. $6.86B and adj EPS $7.60-7.90 vs est. $7.72.