Daily market snapshot

• Stocks edge lower ahead of U.S.-China trade talks – Equity markets finished modestly lower, reversing earlier gains on a light day for economic releases. Multiple Federal Reserve officials delivered speeches or participated in panel discussions, as the Fed's blackout period ended today. Energy and real estate stocks posted the largest gains, while health care and communications stocks led to the downside. In international markets, Asia finished mixed overnight, as China's year-over-year export growth for April beat estimates*. President Trump also suggested lowering U.S. tariffs on most imports from China to 80%*, down from 145%, as the countries prepare for trade talks in Switzerland this weekend. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil traded higher, breaking above $60 a barrel as trade tensions ease*.
   
• Bond yields rise – Bond yields were up, with the 10-year Treasury yield at 4.39%. The yield curve, measured as the difference between 10-year and 2-year Treasury yields, has flattened in recent weeks to about 50 basis points (0.50%). A key driver in this trend has been bond markets reducing expectations for cuts to the fed funds rate this year to three, down from four**. The 2-year Treasury yield has risen a result. The Fed has held rates steady for three consecutive meetings this year and appears poised to remain on the sidelines for the June meeting as well. A healthy labor market, with the unemployment rate still low at 4.2%, is providing the Fed flexibility to wait a while longer to assess the potential impact of tariffs on inflation and the economy. The Federal Open Market Committee's statement following its May meeting noted its view that risks to both of its mandates – the potential for higher unemployment and higher inflation - have risen. We continue to expect the Fed to target the 3.5% - 4% range for the fed funds rate this year, as moderating inflation should allow monetary policy to be less restrictive, in our view. Tariffs could lead to higher prices in the near term but aren't likely to drive sustained inflation, in our view. 
   
• Strong earnings season begins to wind down – With 90% of the S&P 500 companies having reported quarterly results, performance has been strong relative to expectations. Seventy-eight percent have beaten analyst estimates, with an average upside surprise of 8.6%.* Forecasts for first-quarter earnings growth of S&P 500 companies have been revised higher to 13.2%, from 6.7% at the end of the quarter.* Performance has been broad, with eight of the 11 sectors forecast to report higher earnings year-over-year*. Wider earnings growth should drive more balanced market performance across sectors, strengthening the case for portfolio diversification, in our view.

Brian Therien
Investment Strategy

^{Source: *FactSet **CME FedWatch}
 

• Stocks rise on U.S. – U.K. trade agreement – U.S. equity markets closed higher on Thursday, following a trade agreement between the U.S. and U.K., which is expected to lower U.S. tariffs on products such as autos, steel, aluminum and aerospace engines imported from the U.K.* Today's announcement is the first trade agreement with a major trading partner since the U.S. unveiled its tariff plans on April 2. While we suspect the economic impact from today's agreement will be limited, markets reacted favorably on hopes that this could help provide a framework for further negotiations with other trading partners in the weeks ahead. From a leadership perspective, most sectors of the S&P 500 closed higher, led by the consumer discretionary and industrials sectors, while defensive sectors, such as health care and utilities, were among the laggards.* Overseas, markets in Asia finished higher overnight, while European markets traded mostly higher as well following the Bank of England's decision to lower its policy rate by 0.25% to 4.25%.* On the economic front, initial jobless claims were in line with expectations at 228,000, down from the prior week's reading of 241,000.* Bond yields closed higher, with the 2-year Treasury yield rising to around the 3.9% mark, while the 10-year yield rose to 4.39%.*
   
• U.S. announces trade agreement with the U.K. – President Donald Trump announced a trade agreement with the U.K. on Thursday morning. The agreement was primarily focused on specific sectors and the U.S. will maintain a baseline 10% tariff on U.K. goods. However, U.S. imports of steel, aluminum, autos and aerospace engines from the U.K. are expected to see reduced tariffs.* Today's announcement represents the first trade agreement with a major trading partner since the U.S. announced wide-ranging tariffs on April 2, before ultimately delaying them for 90 days to allow for negotiations. From an economic perspective, the agreement with the U.K. will have limited economic impact, in our view, given the broad-based tariffs still in place for the rest of the world. The U.K. was responsible for roughly 2% of U.S. goods imports in 2024, and was the destination for roughly 4% of U.S. goods exports.* However, today's announcement could establish a framework for further negotiations with other trading partners and helps provide substance to recent commentary from U.S. policymakers that trade negotiations are progressing. Trade policy will remain in focus over the coming days, with U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer meeting with Chinese policymakers to begin trade talks this weekend.
   
• Jobless claims tick lower – Initial jobless claims fell to 228,000 last week, in line with expectations and down from the prior reading of 241,000.* Jobless claims remain well below the 30-year average of roughly 360,000 and are modestly below the pre-pandemic average (2015 – 2019) of roughly 240,000.* In addition to a low level of jobless claims, last Friday's nonfarm-payroll report suggested that job growth continued to expand at a healthy pace in April. Nonfarm payrolls rose by 177,000, above expectations of 138,000, while the unemployment rate held steady at 4.2%.* We expect labor-market conditions could ease from current levels as businesses adapt to potentially slower economic growth. However, we don't expect labor-market conditions to collapse, and we believe they will remain broadly supportive to household spending throughout 2025.

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet} 
 

• Stocks rise on planned U.S.-China trade talks – Equity markets closed higher on Wednesday on news that the U.S. and China have set trade talks for this weekend in Geneva, Switzerland. While the outcome of these meetings is uncertain, and a U.S.-China trade deal would likely be complex and require extensive negotiations, any de-escalation would be positive for the economy and financial markets, in our view. We believe even a temporary reduction in tariffs to allow for further talks could help alleviate some of the recent disruption in trade. Bond yields fell, with the 10-year Treasury yield at 4.28%. In international markets, Asia was mostly higher, as China eased policy to help offset the impact of tariffs. Europe was down, as eurozone retail sales grew 1.5% year-over-year in March, ahead of estimates for a 1.4% rise*. The U.S. dollar advanced against major international currencies.* In commodity markets, WTI oil was down near a four-year low on continued concerns with oversupply from OPEC+*.
   
• Fed holds interest rates steady, as expected – The Federal Open Market Committee (FOMC) concluded its May meeting today, with the Fed to maintaining its target range for the federal funds rate at 4.25%-4.5%, as expected. The FOMC updated its statement to reflect its view that risks to both of its mandates – the potential for higher unemployment and higher inflation - have risen. The Fed's most recent projection for the fed funds rate – known as the "dot plot" – laid out expectations for two more cuts this year**, while bond markets are pricing in three cuts, likely starting in July***. We believe the Fed appears poised to remain on the sidelines for a while longer as it seeks to gain greater clarity on the potential impact of tariffs on inflation and the economy. With the fed funds rate at 4.33% and the Fed's preferred measure of inflation – personal consumption expenditure - at 2.3%, monetary policy is likely restrictive, as a neutral policy rate is typically about 1% above inflation. While tariffs could lead to higher prices in the near term, the impact is unlikely to result in sustained inflation, in our view. Once the Fed resumes easing, lower interest rates should reduce borrowing costs for individuals and businesses, in our view, which is supportive of continued economic growth and corporate earnings.
   
• Earnings-season outlook improves on solid results – Disney announced its quarterly results this morning, exceeding earnings estimates for both revenue and earnings.* With 84% of the S&P 500 companies having reported quarterly results, performance has been solid. Seventy-seven percent have beaten analyst estimates, with an average upside surprise of 8.7%.* Forecasts for first-quarter earnings growth of S&P 500 companies have been revised higher to 12.8%, from 6.7% at the end of the quarter.* Performance has been broad, with eight of the 11 sectors reporting higher earnings year-over-year*. Wider earnings growth should drive more balanced market performance across sectors, strengthening the case for portfolio diversification, in our view. Earnings growth is forecast to drift lower over the quarters ahead, combining for 9.2% growth for 2025.* While we believe this figure could be revised lower as tariffs likely weigh on corporate profit margins, earnings should be sufficient to support stock prices over time, in our view.

Brian Therien
Investment Strategy

^{Source: *FactSet **U.S. Federal Reserve ***CME FedWatch}
 

• Stocks finish lower – U.S. equity markets finished lower on Tuesday, with investors awaiting further progress on trade deals. U.S. policymakers continue to hint at potential trade deals over the coming weeks; however, no formal agreements have been announced. From a leadership perspective, most sectors of the S&P 500 finished lower, with utilities and energy the lone sectors to post a daily gain.* Overseas, Asian markets were mostly higher overnight, while European markets were mostly lower despite a lower-than-expected producer price inflation reading in the eurozone.* On the economic front, the U.S. trade deficit widened to $140.5 billion in March, a record high, driven by a surge in imports, as companies looked to front-run tariffs.* Bond yields finished slightly lower, with the 2-year U.S. Treasury yield falling to 3.79% and the 10-year Treasury yield falling to 4.31%.* 
   
• First-quarter earnings results have been strong, but the path forward remains uncertain – First-quarter earnings season is well underway, with roughly 78% of companies in the S&P 500 having reported results thus far.* Results have been broadly positive, with 76% of companies reporting a positive earnings surprise and S&P 500 earnings on pace to grow by over 12%, up from estimates of only 7% in mid-April.* However, estimates for earnings growth in subsequent quarters have been lowered, as companies brace for higher costs under the new tariff regime. This trend was on display last night following earnings results from automobile manufacturer Ford. Despite posting better-than-expected sales and earnings in the first quarter, Ford pulled its 2025 guidance, and management stated it believes that tariffs will lead to a negative impact of $1.5 billion on earnings before interest and taxes (EBIT).* In our view, S&P 500 earnings growth will likely slow from the 12% pace in the first quarter, as tariffs lead to higher input costs for corporations and could reduce household purchasing power through lower inflation-adjusted income. However, we believe that S&P 500 earnings growth in the mid-single digits is achievable in 2025 if the economy is able to avoid a recession, as we expect. Encouragingly, rhetoric from U.S. policymakers has hinted toward a de-escalation in trade tensions over recent weeks. While no concrete agreements have been made on trade, peak uncertainty could very well be behind us. Trade agreements that lead to lower tariffs over time could help remove uncertainty and help provide support to corporate profits. 
   
• Focus turns to the Fed: Central-bank policy will be in focus for investors this week, with the FOMC meeting for May concluding on Wednesday, where expectations are for the Fed to hold its policy rate steady at 4.25% - 4.5%.* With no changes likely to the Fed's policy rate, investor focus will center on commentary from Fed Chair Jerome Powell. In recent commentary, Chair Powell has highlighted that tariffs could pose a challenge to both sides of the Fed's dual mandate, potentially leading to higher inflation and unemployment. Fed Chair Powell has also reiterated that the Fed will need to ensure that a one-time increase in the price level from tariffs does not turn into an ongoing inflation problem, which will likely take time evaluate. Currently, market-based measures of long-term inflation expectations remain well anchored. The 10-year breakeven inflation rate, which is a market-based measure of expected inflation over the next 10 years, is at the low end of its three-year range.* With last Friday's nonfarm-payrolls report better than expected, and a strong ISM Services PMI reading yesterday, we expect Chair Powell to reiterate a message of patience, and highlight that the Fed can proceed cautiously on additional rate cuts. In our view, the Fed will cut rates this year, but likely not until the second half. Futures markets are currently pricing in three rate cuts in 2025, with the first rate cut expected in July.**

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet **CME Fed Watch}
 

• Stocks take a breather: U.S. equity markets closed modestly lower on Monday, with the S&P 500 snapping a streak of nine consecutive days with positive returns. From a leadership standpoint, most sectors of the S&P 500 finished the day flat-to-lower, with defensive sectors, such as consumer staples, among the top performers.* The energy sector was a laggard, declining by 2%, driven by a fall in oil prices following an announcement that OPEC+ will bring additional oil supply to the market beginning in June.* Overseas, markets in Europe were mixed following a better-than-expected economic sentiment reading out of the eurozone.* On the economic front, the ISM Services PMI was higher than expected for April at 51.6, highlighting resilience in the services sector of the U.S. economy despite the uncertain trade-policy backdrop. Bond yields were modestly higher to begin the week, with the 2-year Treasury yield closing around 3.83% and the 10-year yield rising to around 4.34%.*
   
• Still a waiting game on trade negotiations: After falling by 19% from its February 19 all-time high, the S&P 500 has rallied by roughly 13% from the April 8 low, with easing trade tensions a primary catalyst behind the recent gains.* Media has reported positive trade talks between the U.S. and some of its key trading partners, such as Japan, South Korea and India, and reports surfaced this weekend that suggest trade agreements could be announced as soon as this week. Additionally, newly elected Canadian Prime Minister Mark Carney is expected to visit the White House tomorrow to meet with President Trump. However, uncertainty remains around the future path of trade relations with China. While the U.S. administration has stated it expects tariffs on goods from China to fall over time, the timeline for negotiations remains uncertain. Currently, both the U.S. and China have tariffs of over 100% on goods imported from the other country. For investors, navigating the daily twist and turns of markets can feel overwhelming. In our view, taking a long-term approach and maintaining a well-diversified portfolio can help investors navigate volatility and stay on track to reach their financial goals.
   
• Focus turns to the Fed: Central-bank policy will be in focus for investors this week, with the FOMC meeting for May concluding on Wednesday, where expectations are for the Fed to hold its policy rate steady at 4.25% - 4.5%.* With no changes likely to the Fed's policy rate, investor focus will center on commentary from Fed Chair Jerome Powell. In recent commentary, Chair Powell has highlighted that tariffs could pose a challenge to both sides of the Fed's dual mandate, potentially leading to higher inflation and unemployment. With last Friday's nonfarm-payrolls report better than expected, we expect Chair Powell to reiterate this message and highlight that the Fed can take a patient approach to additional rate cuts. We believe the Fed will cut rates this year, but likely not until the second half. Futures markets are currently pricing in three rate cuts in 2025, with the first rate cut expected in July.**

Brock Weimer, CFA
Investment Strategy

^{Source: *FactSet **CME Fed Watch}