Market Update: U.S. Indices Perform Well Amid Eased Trade Tensions
On Tuesday, major stock indices in the United States showcased a mixed performance. The S&P 500 Index closed higher, increasing by 0.72%. Conversely, the Dow Jones Industrial Average saw a decline, closing down by 0.64%. The Nasdaq 100 Index marked a robust increase, climbing 1.58%. June futures for the S&P and Nasdaq were also on the rise, up by 0.64% and 1.48%, respectively.
The stock market managed to recover from early losses, building on a strong rally from Monday. This upswing was supported by easing inflation pressures, as revealed in the U.S. April consumer price index (CPI) report, which showed a rise of 2.3% year-over-year—slightly below the expected 2.4%. This marks the smallest annual increase in four years. The CPI excluding food and energy remained steady at a 2.8% increase year-over-year.
An important factor contributing to the market’s positive momentum was the agreement between the U.S. and China to reduce tariffs, helping to de-escalate trade tensions between the two largest economies. This news alleviated some fears of a potential U.S. recession linked to ongoing trade disputes.
In corporate news, shares of semiconductor companies experienced a boost following reports that Nvidia and Advanced Micro Devices would collaborate with the Saudi Arabian company, Humain, for a new data center. Additionally, the U.S. Department of Commerce announced plans to rescind certain AI diffusion rules, indicating a shift in regulations concerning semiconductor exports.
Another noteworthy point on Tuesday was the downturn in health insurance stocks, particularly UnitedHealth Group, which plummeted over 17% after its CEO announced an immediate resignation for personal reasons. The company also suspended its 2025 outlook due to anticipated increases in medical costs.
Market sentiment took a hit from comments made by Treasury Secretary Bessent regarding trade negotiations with the European Union. He described the EU’s approach as facing a “collective action problem,” suggesting that discussions between the U.S. and Europe might progress more slowly than desired.
Looking ahead, investors should keep an eye on upcoming economic indicators. Retail sales for April are anticipated to show a slight increase of 0.1% month-over-month, while the Producer Price Index (PPI) is expected to rise by 0.2% month-over-month. Furthermore, manufacturing production is projected to decline by 0.4% month-over-month.
As the first quarter earnings season comes to an end, approximately 75% of S&P 500 companies have reported, with 77% exceeding expectations—marking the highest success rate since Q2 2024. Earnings growth for Q1 is currently at 13.1%, a significant increase from the pre-season estimates of 6.6%. However, forecasts for full-year 2025 corporate profits now suggest a growth of 9.4%, a decrease from earlier projections of 12.5%.
In international markets, European stocks also finished higher, with the Euro Stoxx 50 index gaining 0.44%. China’s Shanghai Composite rose by 0.17%, reflecting increasing confidence, while Japan’s Nikkei Stock 225 saw a notable rise, closing up 1.43%.
Interest Rate Movements
June 10-year Treasury notes concluded the day lower, down six ticks. The yield for 10-year T-notes climbed to 4.499%, reaching a month-long high. The performance of these notes was impacted by fluctuations in European government bonds and a rally in the S&P 500, which dampened demand for safe-haven assets like government debt.
European bond yields also increased, with the German 10-year bund yield hitting a one-month peak of 2.680%. Moreover, the recent ZEW economic sentiment survey from Germany indicated a marked improvement, suggesting stronger economic growth expectations than previously anticipated.
Key Stock Performances
In stock movements, chip manufacturers continued their rally, contributing significantly to overall market gains. Stocks like Nvidia, Micron Technology, and Advanced Micro Devices saw impressive upticks, with increases of more than 5% for Nvidia and Micron.
Coinbase Global experienced a substantial rise of over 23% after news that it would be added to the S&P 500 Index. Meanwhile, Super Micro Computer gained more than 15% following a positive coverage initiation from Raymond James.
In contrast, UnitedHealth Group faced a steep decline, significantly affecting health insurance sector stocks. Additionally, defensive food and beverage stocks struggled against the broader market trend, with various companies like Mondelez International and Conagra Brands seeing losses.
As the market adjusts to new economic indicators and corporate developments, analysts will continue to monitor key trends to inform investment strategies moving forward.
