Week in Review: May 2, 2025

May 5, 2025

Recap & Commentary

Markets ended the week higher propelled by increased optimism around trade, a spate of encouraging earnings reports, April’s better-than-expected jobs report, and inflation data.

Trade sentiment was aided by an announcement from Commerce Secretary Lutnick that a trade deal with an unnamed country had been completed, reports that China is easing tariffs on certain US goods, comments from Chinese officials suggesting it is open to trade talks, and President Trump’s decision to partially relax his 25% tariff on foreign-made autos and parts.

A busy economic calendar was dominated by 1Q25 GDP and April’s employment report. GDP shrank in the first quarter at a -0.3% annualized pace. Imports had a disproportionate impact, subtracting 5% from headline growth. In an encouraging sign, real final sales to private domestic purchasers increased 3.0%, up from 2.9% in 4Q24, suggesting underlying demand remained strong.

In addition to trade announcements and a very busy economic calendar, 180 S&P 500 companies reported earning, including several Mag 7 companies. Strong reports from Microsoft, Apple, Meta, and Amazon helped assuage some near-term concerns about overall demand for tech products and services. As of Friday, 72% of S&P 500 companies had reported 1Q25 earnings. Thus far, 76% have exceeded their consensus forecast. According to industry group FactSet, consolidated earnings growth is expected to be 12.8%, up from the 7.2% forecast on March 31.

Economic Commentary

Nonfarm payrolls added 177K new jobs in April, exceeding the consensus forecast of 138K. Unemployment remained unchanged at 4.2%, marking the 12th consecutive month in which the measure has remained rage bound between 4.0-4.2%. The report helped allay concerns about the impact of recent heightened economic uncertainty on the labor market.

The Fed’s preferred measure of inflation, core personal consumption expenditure (PCE), was flat for the month of March, after increasing 0.5% in February. Compared to a year ago, core PCE slowed from 3.0% to 2.6%, tied with June 2024 for its slowest pace since March 2021. The decline helped to reduce concerns about the impact of tariffs on inflation. However, the first real indication of President Trump’s Liberation Day tariffs won’t be known until the release of CPI in mid-May.

According the industry group ISM, manufacturing activity continued to contract in April in the face of heightened uncertainty. Employment contracted for a third consecutive month and 10th time in the past 11 months. New orders contracted for the third consecutive month reflecting weaker demand.

Weekly jobless claims jumped 18K to 241K a two-month high. Continuing claims 93K to 1.93M, the highest level since 2021. The steady growth in continuing claims suggests that individuals who have lost jobs are finding it increasingly difficult to find new ones.

Of Note

Starting Friday, May 2, the “de minimis” exemption allowing packages valued under $800 to enter the US duty-free ended. More than half of such packages come from China, whose imports into the US are subject to a 145% tariff.

Market Indices (As of 05/02/2025)

• ISM Services
• Exports/Imports
• Consumer Credit
• Initial Jobless Claims