May 12, 2025
S&P futures surged 2.7% early Monday after last week’s pullback, which followed two strong weeks that recovered early April tariff losses. Equal-weight S&P outperformed the benchmark by 90 bp last week. Asian markets rose overnight, led by Hong Kong (+3%), with South Korea and India also higher. European equities gained nearly 2%. Treasuries saw bear flattening, with shorter-dated yields up 9-10 bp. The dollar index climbed 1.1%, gold dropped 3.5%, Bitcoin futures rose 0.7%, and WTI crude surged 3.3%.
US-China Trade Relief Boosts Risk Appetite
Weekend talks in Switzerland led to significant de-escalation of US-China trade tensions. For 90 days, US tariffs on Chinese goods will drop from 145% to 30%, while China will reduce tariffs on US goods from 125% to 10%. This relief exceeded expectations and is expected to drive bullish sentiment alongside robust retail buying, strong corporate buybacks, and a better-than-feared Q1 earnings season.
Other Key Developments
- Washington: GOP tax reconciliation bill estimates at $5T, exceeding budget limits; Medicaid savings less aggressive than expected. Trump plans to announce a “most favored nation” policy for drug pricing, likely pressuring pharma stocks.
- Geopolitics: India-Pakistan ceasefire remains fragile; Zelensky invited Putin for peace talks in Turkey.
- Fed and Economic Data: Fed Governor Kugler to speak today. This week’s highlights include CPI, NFIB small business optimism, retail sales, PPI, industrial production, and housing data, with Fed Chair Powell speaking Thursday.
US equities closed narrowly mixed on Friday with the Dow rising 0.29%, the S&P 500 up 0.07%, the Nasdaq unchanged, and the Russell 2000 increasing by 0.16%. The S&P 500 and Nasdaq ended the week lower after two consecutive weeks of gains, reflecting cautious sentiment amid ongoing trade negotiations and shifting Federal Reserve expectations. Trade developments dominated headlines, with US-China talks in Switzerland suggesting a potential de-escalation of tariffs. Reports indicate the US may reduce tariffs on Chinese imports below 60%, though President Trump floated maintaining rates around 80%. These discussions, combined with bearish market positioning earlier in the year, have fueled a partial rebound in equities.
The S&P 500 now trades at 21x forward earnings, raising concerns about valuations, especially with double-digit growth still anticipated in 2025 and 2026. Fed officials reiterated a “wait-and-see” approach, emphasizing the risks of persistent inflation due to tariffs and other supply chain disruptions. Fed Governor Barr noted that tariff impacts could exacerbate inflation, lower growth, and raise unemployment, while Richmond Fed President Barkin highlighted resilience in consumer spending and business investment. Treasuries were little changed, the dollar index fell 0.2%, and gold rose 1.2%. Crude oil (WTI) settled up 1.8%, gaining 3.2% for the week.
Sector Performance
- Outperformers: Energy (+1.05%), Real Estate (+0.65%), Consumer Discretionary (+0.63%).
- Underperformers: Healthcare (-1.10%), Communication Services (-0.62%), Consumer Staples (-0.61%).
Company-Specific News by GICS Sector, Friday May 9, 2025
Energy
- ExxonMobil (XOM): Outperformed as WTI crude rose 1.8%.
Materials
- Freeport-McMoRan (FCX): Copper/aluminum stocks were notable outperformers amid tariff-related trade optimism.
- ILMN (-11.2%): Lowered FY25 guidance, citing challenges from tariffs and China.
Industrials
- Boeing (BA): Marginal impact from US-China trade developments but benefitted from broad sentiment shifts.
- LYFT (+28.1%): Beat expectations on riders, bookings, EBITDA, and FCF, with a $750M buyback announced.
Consumer Discretionary
- TSLA: Mixed performance in big tech, but Tesla stood out with resilience in the EV space.
- TOST (+11.4%): Beat expectations despite macro pressures; improved subscription revenue conversion.
Consumer Staples
- MNST (+1.4%): While revenue missed, gross margins were better than expected due to pricing power.
- POST: Surpassed expectations with Foodservice as a standout performer.
Healthcare
- PODD (+20.9%): Q1 beat with strong new patient starts; raised FY guidance.
- IOVA (-44.8%): Sharp decline after missed revenue and weak guidance attributed to slower product adoption.
- TMDX (+19.6%): Strong Q1 results with growth in liver transplants and minimal tariff impact.
Financials
- AFRM (-14.5%): Despite a largely positive FQ3, lowered FY guidance led to a decline, exacerbated by macro pressures.
Information Technology
- NET (+6.5%): Revenue and operating income beat, buoyed by strategic deal momentum.
- MCHP (+12.6%): Strong Q1 results with signs of recovery in customer demand and inventory levels.
Communication Services
- PINS (+4.9%): Positive Q1 with user engagement growth and better-than-expected guidance.
- SOUN (-7.8%): Headwinds from deal delays weighed on revenue despite key partnership announcements.
Utilities
- Outperformed slightly (+0.17%), supported by sector rotation amid heightened volatility in broader equity markets.
Eco Data Releases | Monday May 12th, 2025
S&P 500 Constituent Earnings Announcements | Monday May 12th, 2025
Data sourced from FactSet Research Systems Inc.
