On Tuesday, the major U.S. stock indexes experienced significant gains, amid broader market optimism driven by geopolitical developments and domestic economic indicators. The S&P 500 Index rose by 2.05%, the Dow Jones Industrial Average increased by 1.78%, and the Nasdaq 100 soared by 2.39%. Futures contracts also displayed upward momentum, with June E-mini S&P futures climbing by 2.11% and June E-mini Nasdaq futures gaining 2.36%.
Market enthusiasm was notably boosted by news that President Donald Trump had extended the deadline for imposing 50% tariffs on European Union goods until July 9. This decision came after a weekend of intense negotiations and speculation about potential trade impacts. Analysts see this tariff postponement as a measure aimed at mitigating immediate tension between the U.S. and EU as discussions around trade agreements continue.
Further optimism was evident from remarks by National Economic Council Director Larry Kudlow, who indicated a likelihood of securing several trade deals imminently, particularly highlighting possible agreements with India. Such statements have catalyzed stock gains and suggest that trade negotiations may be progressing more favorably than previously anticipated.
Investors also responded positively to the release of the Conference Board’s Consumer Confidence Index for May, which surged to a three-month high of 98, significantly outpacing expectations of 87.1. The jump in consumer confidence signals a robust sentiment among U.S. consumers, possibly reflecting optimism about the economy and their personal financial situations.
In addition to trade tensions easing, the bond market showed notable fluctuations, with the yield on the 10-year Treasury note dipping by 8 basis points to close at 4.43%. This decline followed increasing speculation regarding Japan’s potential reduction in debt issuance, which could lead to heightened demand for U.S. treasuries. Reports indicated that Japan’s Finance Ministry recently circulated a questionnaire among market participants to assess appropriate issuance amounts for government bonds, hinting at a strategic pivot in Japan’s debt management. The lowered yields on U.S. Treasury securities generally bolster equities, as lower borrowing costs can aid businesses and consumers alike.
However, the economic landscape wasn’t entirely positive. Data released indicated a 1.3% month-over-month decline in U.S. capital goods orders, excluding defense and aircraft, which fell short of market expectations of a 0.2% decrease. This marked the largest drop in six months, highlighting some underlying weaknesses in business investment—which could dampen long-term growth if sustained.
Additionally, the S&P CoreLogic Case-Shiller 20-City Home Price Index reported an annual increase of 4.07% for March, below expectations of 4.5% and reflecting the smallest growth seen in over 18 months. Such data may suggest cooling in the housing market, a critical sector for economic vitality.
The Dallas Federal Reserve’s survey on manufacturing activity also showed unexpected resilience, with a reading of -15.3 for May, an improvement from the anticipated -23.1. This mixed set of economic signals underlines the complexity of the current economic environment, where positive consumer sentiment coexists with signs of weakening investment and housing trends.
In terms of monetary policy, Minneapolis Fed President Neel Kashkari advocated for maintaining current interest rates, underscoring the need for clearer insights into the implications of ongoing tariff disputes and their effects on inflation. Market expectations for a 25 basis point rate cut at the upcoming Federal Open Market Committee meeting in June remain low, currently estimated at just 6%.
As the market looks ahead, this week will be pivotal with important economic indicators on tap. Investors will scrutinize forthcoming data, including initial unemployment claims—expected to rise marginally to 230,000—as well as first-quarter GDP figures projected to remain unchanged at -0.3%. The anticipated release of pending home sales is likely to reveal a 1% month-over-month decline, compounding concerns over the real estate market’s trajectory.
On Friday, personal income is predicted to increase by 0.3%, while personal spending is expected to tick up by 0.2%. Additionally, the core Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, is forecasted to show a 1-month increase of 0.1% and a year-over-year rise of 2.5%. The University of Michigan’s consumer sentiment index is also set for a revision, potentially moving to 51 from an initial reading of 50.8.
As the earnings season nears conclusion, over 90% of S&P 500 companies have released results; 77% of these firms exceeded analyst expectations, marking the highest proportion since the second quarter of 2024. Earnings growth in Q1 has been stellar, tracking at 13.1% against initial projections of 6.6%, although forecasts for corporate profits for the S&P 500 in full-year 2025 have been revised down to 9.4% from earlier estimates of 12.5%.
Global markets presented a mixed picture on Tuesday, with the Euro Stoxx 50 rising by 0.37% amidst broader recovery efforts in Europe. In contrast, the Shanghai Composite dipped to a two-and-a-half-week low, declining by 0.18%. Japan’s Nikkei 225 showed positive momentum, closing up by 0.51%, reflecting regional variations in investor sentiment and economic conditions.
While U.S. interest rates saw a decrease, the international bond market mirrored these trends. June 10-year T-notes experienced a rise, closing up by 14 ticks as yields fell due to positive momentum from German bunds and signs of potential demand increases for U.S. securities. Despite the robust stock gains, the Treasury market faced challenges, notably a subpar demand in a recent $69 billion 2-year T-note auction, reflected in a bid-to-cover ratio that fell below historical averages.
European government bond yields also trended downward, contributing to a favorable environment for U.S. debt. For instance, the yield on 10-year German bunds decreased to a two-and-a-half-week low, settling down by 2.8 basis points to 2.532%. Similarly, the yield on the 10-year UK gilt fell, reflecting broader investor caution as economic data suggests ongoing challenges within major economies.
Market participants exhibited enthusiasm for technology stocks, with significant contributions from major players in the sector. Companies such as Tesla and Nvidia saw their stock prices rise by over 6% and 3%, respectively. Collectively, the group often referred to as the “Magnificent Seven”—including Alphabet, Meta Platforms, Amazon, Apple, and Microsoft—displayed solid gains, benefitting from an overall bullish market sentiment.
Recruiting attention were also travel and cruise line stocks, which responded positively to increased consumer confidence and expectations of a tourism revival. Carnival Cruise Lines and Royal Caribbean each posted gains exceeding 6%, while Southwest Airlines and others followed suit with substantial upticks.
Contrarily, gold mining stocks faced downward pressure as the price of gold fell by nearly 2%. Corporate entities such as Gold Fields Ltd and Newmont experienced declines that reflected this commodity downturn. PDD Holdings witnessed a significant drop exceeding 13% following disappointing quarterly performance metrics, while Fair Isaac, another notable decliner, fell more than 11% amid regulatory concerns regarding credit score reporting.
As the current economic climate evolves, market stakeholders will closely monitor both domestic and global developments, particularly regarding trade, monetary policy, and sector-specific trends that may shape market dynamics in the coming weeks. The interplay of these factors will be crucial in determining future equity performance and overall economic momentum as the year progresses.