Market Insights

Stocks might be stuck as trade worries return and earnings season ends.

The S&P 500 rose 1.9 percent in the holiday-shortened week between Friday, May 23, and Friday May 30. It also ended May up 6.2 percent, the biggest monthly gain since November 2023.

Activity was bullish coming out of Memorial Day, with stocks rallying after the White House delayed 50 percent tariffs on Europe. Consumer confidence jumped the next day on optimism that trade wars would end soon. On Wednesday, the Court of International Trade blocked most of President Trump’s tariffs and chip giant Nvidia (NVDA) reported strong quarterly results.

But then an appeals court temporarily halted the tariff ruling and the White House blocked Chinese access to software for semiconductor design. Treasury Secretary Scott Bessent said talks with Beijing were stalled, threatening to undo progress made in Geneva on May 12. More tension followed the next day.

China “HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” Trump declared on Truth Social Friday morning. (Capitalization in original.) “So much for being Mr. NICE GUY!” A subsequent report from Bloomberg News said the administration plans to increase sanctions on Chinese tech firms.

There were also signs of tariffs starting to hurt corporate profits, as some companies warned in their quarterly results. The list included:

• HP (HPQ): Computer hardware
• Gap (GAP) and Macy’s (M): Apparel
• Best Buy (BBY): Electronics

Additionally on Friday, Trump announced steel tariffs will double from 25 percent to 50 percent this coming Wednesday.

Safe Havens Lead Again

Real-estate investment trusts, consumer staples and healthcare rose the most last week. Strength in those sectors, which are less sensitive to economic downturns, may reflect diminished risk appetite. It was the second consecutive week that “safe havens” outperformed.

Solar-energy stocks and retailers also bounced.

Ulta Beauty (ULTA) and industrial supplier Nordson (NDSN) climbed on strong earnings. Takeover speculation lifted Hologic (HOLX), a provider of medical imaging for women’s health.

Chinese stocks, energy and materials fared the worst. That’s also consistent with cautious sentiment toward the economy.

Regeneron Pharmaceuticals (REGN) had its biggest weekly drop in 16 years after a late-stage trial showed its potential lung treatment failing to deliver expected results.

Cooper (COO) issued conservative guidance, citing weak demand for contact lenses and fertility products.

Texas Pacific Land (TPL) dropped along with other energy stocks.

HPQ fell after warning about tariffs. Cadence Design Systems (CDNS) slid because of the rules on chip software. Competitor Synopsys (SNPS) had the sixth-biggest drop in the S&P 500, according to TradeStation data.

Jobless Claims Rise

Last week’s economic data was mixed. Revised first-quarter gross domestic product showed weaker consumer spending. The trade gap for April narrowed sharply, reflecting a drop in imports after the tariff-induced spike earlier in the year.

Jobless claims showed potential weakness in the labor market. Initial claims, which track when people seek benefits for the first time, exceeded forecasts. Continuing claims, which track workers staying on benefits, climbed to the highest level since late 2021. That could mean that unemployed Americans are struggling to find new jobs.

FactSet also noted that Wall Street analysts lowered earnings estimates by 4 percent in April and May, more than the 2.6 percent average cut. Energy and materials had the biggest markdowns.

Charting the Market

The S&P 500 has remained in a range between its January low and the last weekly close of 2024. The sideways movement follows a sharp rally between April 7 and May 19.

There could be signs of the short-term uptrend slowing. For example, the moving average convergence/divergence (MACD) oscillator has stopped rising. The index also remained entirely within the previous week’s range. That so-called inside week followed an outside candle the previous week. The big move, followed by tightening, may confirm that a range is forming.

The index has also remained above its 200-day moving average, a potential sign of longer-term strength.

Chart watchers may view the price action as inherently neutral, with the potential for a breakout in either direction depending on the news flow. Headlines on tariffs may remain important catalysts, although there are other events like non-farm payrolls this Friday and the consumer price index (CPI) on June 11.

Traders may also watch Treasury yields, which have risen on worries about trade and the U.S. fiscal deficit. The yield on the important 10-year note fell after rising for four straight weeks. It also remained below its January peak. Staying in this range or moving lower could potentially support risk appetite.

S&P 500, daily chart, with select patterns and indicators.

The Week Ahead

This week brings some important monthly economic data and a few big earnings reports in the technology sector.

The Institute for Supply Management’s manufacturing index is due this morning.

Tomorrow brings the JOLTs job opening report. Dollar General (DG), CrowdStrike (CRWD) and Hewlett-Packard Enterprise (HPE) announce quarterly results.

ADP’s private-sector payrolls report is on Wednesday morning, along with ISM’s service-sector index and crude-oil inventories. Dollar Tree (DLTR) and MongoDB (MDB) report earnings.

Thursday features initial jobless claims and earnings from Broadcom (AVGO).

Non-farm payrolls are on Friday morning.