The S&P 500 Index ($SPX) (SPY) Friday closed up +0.70%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.78%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.43%.  June E-mini S&P futures (ESM25) are up +0.68%, and June E-mini Nasdaq futures (NQM25) are up +0.48%. 

Stock indexes on Friday settled higher, with the S&P 500 posting a 2-1/4 month high and the Dow Jones Industrials posting a 1-1/2 month high. Stocks on Friday extended this week’s rally as trade tensions between the US and China eased, which  fueled risk-on sentiment in asset markets.  Stocks added to their gains Friday afternoon on  optimism about  US trade negotiations after the Financial Times reported the US and European Union broke an impasse to enable tariff talks.  Also, lower T-note yields on Friday supported stocks on speculation that the Fed would step in to lower interest rates to avoid a recession. 

Friday’s US housing news was weaker than expected and was negative for stocks but supported bond prices after Apr housing starts and building permits fell more than expected.  However, the US Apr import price index ex-petroleum posted its biggest increase in a year, a hawkish factor for Fed policy.

Stock gains were limited Friday after the University of Michigan US May consumer sentiment index unexpectedly fell to a 3-year low.  Also, the University of Michigan US May inflation expectations unexpectedly rose to multi-decade highs, a hawkish factor for Fed policy.

US Apr housing starts rose +1.6% m/m to 1.361 million, weaker than expectations of 1.364 million.  Also, Apr building permits, a proxy for future construction, fell -4.7% m/m to 1.412 million, weaker than the consensus of 1.450 million.

The US Apr import price index ex-petroleum rose +0.4% m/m, stronger than expectations of +0.1% m/m and the biggest increase in a year. 

The University of Michigan US May consumer sentiment index unexpectedly fell -1.4 to a nearly 3-year low of 50.8, weaker than expectations of an increase to 53.4. 

The University of Michigan US May 1-year inflation expectations indicator jumped to a 43-year high of 7.3%, higher than expectations of no change at 6.5%.  Also, the May 5-10-year inflation expectations indicator rose to a 34-year high of 4.6%, higher than expectations of no change at 4.4%.

Friday’s comments from Atlanta Fed President Bostic were mildly supportive for stocks when he said he expects the US economy to slow this year but not fall into recession and sees “one rate cut this year” amid economic uncertainty and as tariffs put upward pressure on inflation.

The markets are discounting the chances at 9% for a -25 bp rate cut at the next FOMC meeting on June 17-18.

Q1 earnings reporting season is winding down.  So far, over 80% of companies in the S&P 500 have reported quarterly results, and 77% have beaten estimates, the highest since Q2 of 2024.  Earnings growth in Q1 is running at +13.1%, compared with just +6.6% expected before the start of the season.  Full-year 2025 corporate profits for the S&P 500 are seen rising +9.4%, down from the forecast of +12.5% in early January.  

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 rose to a 7-week high and closed up +0.29%.  China’s Shanghai Composite closed down -0.40%.  Japan’s Nikkei Stock 225 closed unchanged.

Interest Rates

June 10-year T-notes (ZNM25) Friday closed up +2.5 ticks.  The 10-year T-note yield fell -0.4 bp to 4.428%.  June T-notes on Friday posted modest gains on positive carryover from a rally in European government bonds.  T-notes also found support on Friday’s weaker-than-expected US Apr housing starts and building permits reports and the unexpected decline in the University of Michigan US May consumer sentiment index to a 3-year low. T-notes were undercut after the US Apr import price index ex-petroleum rose by the most in a year, and the University of Michigan US May inflation expectations unexpectedly rose to multi-decade highs, hawkish factors for Fed policy.

European government bond yields on Friday finished lower.  The 10-year German bund yield fell -3.2 bp at 2.590%. The 10-year UK gilt yield fell -1.1 bp to 4.649%.

ECB Governing Council member Kazaks said ECB interest rate cuts are nearing their endpoint as “we are relatively close to the terminal rate already” if the base case for inflation returning to 2% this year materializes.”

Swaps are discounting the chances at 91% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Recently beaten-down pharmaceutical stocks and health insurance companies rallied on Friday.  UnitedHealth Group (UNH) closed up more than +5% to lead gainers in the S&P 500.  Also, Moderna (MRNA) closed up more than +5%, and Humana (HUM) closed up more than +4%.  In addition, Eli Lilly (LLY), Elevance Health (ELV), Cigna Group (CI), and CVS Health (CVS) closed more than +3%, and Centene (CNC), West Pharmaceutical Services (WST), and Gilead Sciences (GILD) closed up more than +2%. 

Applied Materials (AMAT) closed down more than -5% to weigh on chip stocks and lead losers in the S&P 500 and Nasdaq 100 after reporting Q2 net sales of $7.10 billion, below the consensus of $7.13 billion.  Also, Marvell Technology (MRVL) closed down more than -2%, and Broadcom (AVGO), KLA Corp (KLAC), and ASML Holding NV (ASML) closed down more than -1%.

CoreWeave (CRWV) closed up more than +22% after a 13G regulatory filing showed Nvidia raised its stake in the company to 7% from 5.2%.

Archer Aviation (ACHR) closed up more than +9% after being selected as the “Official Air Taxi Provider” for the 2028 LA Olympic and Paralympic Games. 

Adobe (ADBE) closed up more than +3% to lead gainers in the Nasdaq 100 after Jeffries said Adobe’s price increase on the Creative Cloud software plans makes its 2025 revenue forecast look “conservative.”

Rocket Cos (RKT) closed up more than +3% after ValueAct Capital Management LLC reported a 9.9% holding in the company. 

Vistra Corp (VST) closed up +3% after acquiring seven natural gas generation facilities from Lotus Infrastructure Partners for $1.9 billion.

Martin Marietta Materials (MLM) closed up more than +2% after UBS upgraded the stock to buy from neutral with a price target of $634. 

Constellation Brands (STZ) closed up more than +2% after Warren Buffet’s Berkshire Hathaway added to its stake in the company, which now stands at 6.6% or $2.2 billion.

Globant SA (GLOB) closed down more than -23% after reporting Q1 revenue of $611.1 million, weaker than the consensus of $621.1 million, and cut its full-year revenue forecast to $2.46 billion from a previous forecast of $2.64 billion-$2.71 billion, well below the consensus of $2.63 billion. 

Doximity (DOCS) closed down more than -10% after forecasting 2026 revenue of $619 million to $631 million, below the consensus of $634.6 million.

Take-Two Interactive Software (TTWO) closed down more than -2% after forecasting 2026 net bookings of $5.90 billion to $6.0 billion, well below the consensus of $7.8 billion.

Starbucks (SBUX) closed down more than -1% after several analysts said Thursday’s CFO meet & greet provided little clarity on the timeline for margin improvement. 

Earnings Reports (5/19/2025)

8x8 Inc (EGHT), Agilysys Inc (AGYS), Aldeyra Therapeutics Inc (ALDX), Gencor Industries Inc (GENC), Safe Bulkers Inc (SB), Target Hospitality Corp (TH), Transcat Inc (TRNS).