S&P 500 and Market Update: Trade Talks and Economic Indicators
On Thursday, the S&P 500 Index ($SPX) notched a marginal gain of 0.13%, while the Dow Jones Industrial Average ($DOWI) saw a decline of 1.33%. The Nasdaq 100 Index ($IUXX) remained stable without significant changes. The June E-mini S&P futures experienced a slight uptick of 0.19%, and June E-mini Nasdaq futures went up by 0.10%.
The mixed results in the stock market were influenced by a positive outlook from recent US-Japan trade talks. Hopes for potential agreements with various trading partners were heightened after President Trump indicated substantial progress during negotiations with Japan. He expressed optimism that the United States would also secure a favorable deal with the European Union. Enhanced performance in energy stocks contributed to broader market gains, driven by a surge in WTI crude oil prices, which rose over 3% to reach a one-and-a-half week high.
Furthermore, encouraging labor market data emerged as U.S. weekly jobless claims unexpectedly dropped to a two-month low. Although some economic indicators were mixed—housing starts fell while building permits rose—the overall sentiment remained positive. Notably, the Philadelphia Fed’s business outlook survey plummeted to a two-year low, adding some caution to the economic narrative.
Stocks within the health insurance sector faced pressure, significantly affecting the Dow Jones index. UnitedHealth Group’s shares plummeted over 22% after it revised its earnings forecast downwards for the year. Additionally, semiconductor stocks continued to decline, led by Nvidia, which fell by 2% following a notable 6% drop earlier in the week due to governmental trade restrictions on its H20 chips sold to China.
The latest figures on U.S. initial unemployment claims reflected a stronger labor market than anticipated, showing a decline of 9,000 claims to reach a two-month low of 215,000. This was contrary to forecasts, which anticipated an increase to about 225,000 claims.
In terms of construction activity, March housing starts saw a decline of 11.4% month-over-month, at a figure of 1.324 million, falling short of the expected 1.420 million. However, building permits, which serve as an indicator for future construction, unexpectedly rose by 1.6% month-over-month, reaching 1.482 million, outpacing predictions for a decline.
The Philadelphia Fed’s business outlook dropped significantly, reflecting a reduction of 38.9 points to a two-year low of -26.4, which was far below the expected 2.2.
Interest rates also came into focus, with expectations for future movements becoming crucial for investors. The market estimated only an 11% chance of a 25 basis points rate cut following the upcoming Federal Open Market Committee meeting on May 6-7.
Corporate earnings for Q1 kicked off last Friday with major banks announcing their results. Current market consensus anticipates a year-over-year earnings growth of 6.7% for S&P 500 stocks, a downward adjustment from earlier expectations of 11.1%. Projections for corporate profits in 2025 have also been toned down, now suggesting a growth rate of 9.4%, compared to previous forecasts of 12.5%.
Globally, European stock markets demonstrated varied results. The Euro Stoxx 50 closed down by 0.63%, while China’s Shanghai Composite reached a two-week high, ending up by 0.13%. Japan’s Nikkei Stock 225 climbed by 1.35%.
In terms of trade policy, President Trump announced a temporary exemption for consumer electronics from reciprocal tariffs while the 20% tariff on electronics imported from China remains in effect. A 90-day suspension of higher reciprocal tariffs on 56 nations was also declared, though the baseline 10% tariff still applies universally. Meanwhile, the EU stated they would pause tariffs worth 25% on approximately 21 billion euros’ worth of U.S. goods for 90 days.
Interest in government bonds fluctuated as Treasury yields adjusted in response to reduced demand for safe-haven assets. The 10-year Treasury note saw its yield rise to 4.325%. Conversely, European bond yields dipped, with the 10-year German bund yield dropping to 2.472%, reflective of overarching economic pressures.
Energy stocks saw notable gains, particularly as WTI crude prices surged. Firms like Diamondback Energy and APA Corp posted significant increases in share price. Conversely, health insurance stocks suffered losses, with UnitedHealth Group leading the downturn. Meanwhile, Eli Lilly’s shares surged following favorable trial results for a new diabetes drug.
Overall, the market continues to navigate through a complex web of economic indicators, trade tensions, and shifting forecasts as it seeks a forward path amidst increasing volatility.
