Weekly Market Update for May 16, 2025
The S&P 500 rose every day this week as the major stock indices continue to rebound from their April lows. Stocks benefitted from some tariff relief and cooler inflation readings. Year to date, the major stock indices are returning to positive territory. The S&P 500 has risen +20% from its April 8th low and is now up +1% on the year. The Nasdaq has risen +26% from its low and is nearly flat on the year. This week, the S&P 500 rose +5% while the Nasdaq rose +7%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.43%, up +5 bps from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, rose +2 bps to 4.26%.
Stocks and Preferred securities jumped on Monday following a productive meeting between Treasury Secretary Bessent and representatives from China last weekend. Both countries agreed to a temporary tariff truce that would dramatically reduce tariff rates for the next 90 days. This de-escalation provided considerable relief to US retailers who were concerned about inventory levels and the risk of bare shelves during the second half of the year. Economic data was also positive this week. CPI inflation rose at a 2.3% pace while PPI rose at a 2.4% pace – both slower than prior months and cooler than anticipated.
In equity portfolio news, recently beleaguered holding UnitedHealth Group faced additional headwinds this week. The company rescinded their annual operating guidance on Tuesday while announcing the CEO would step down; then on Thursday the WSJ reported the company was under investigation for possible Medicare fraud. While the company has stated they have not received any notice of an investigation and stands by the integrity of their Medicare programs, the possibility has shaken investor trust. The company’s board of directors has installed former CEO Stephen Hemsley, who successfully led the company from 2006-2017 and who remained board chair, as the replacement CEO. While we are encouraged by Hemsley’s return to the helm and believe the stock’s valuation doesn’t reflect its earnings capacity today, the company may be in a penalty box for the next few months. Thus, we may look to realize some losses in taxable accounts which have higher cost bases to offset gains in other portfolio names, but generally we are holding UNH positions.
Looking ahead to next week, scheduled news flow should be rather quiet. Home Depot will report Q1 earnings on Tuesday with Lowe’s reporting the day after. Both companies are amongst the largest US importers of products from China, so commentary regarding tariffs will be noteworthy. Existing home sales for April will be released Thursday while new home sales come Friday. Mortgage rates above 6.5% still remain a headwind to any uptick in home sales activity.
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