Week in Review: May 23, 2025

May 27, 2025

Recap & Commentary

Markets ended the week lower, pressured by rising rates and the threat of new tariffs.

On Wednesday, a weak 20-Year Treasury auction pushed yields up across the long end of the yield curve while simultaneously putting downward pressure on equity markets. The weak auction, coupled with Moody’s downgrade to its US credit rating the prior week weighed on bonds, as did the passage of the House spending bill that the Congressional Budget Office (CBO) calculated will add $3.8T to the national debt over the next decade. In the aftermath of the auction, the 30-Year Treasury yield briefly reached 5.15%, its highest level since late 2023, before ending the week at 5.04%. Sustained yields above 5% would likely serve as a headwind to further advances in equity markets. At the same time, the 10-Year Treasury yield briefly surpassed 4.60%, its highest level since February before ending the week at 4.52%.

On Friday, President Trump reignited tariff concerns that had partially receded following the 90-day pause in tariffs between the US and China, when he unexpectedly announced a 50% tariff on all imports from the EU beginning June 1, expressing frustration with the current pace of talks. Additionally, Trump said he “wasn’t looking for a deal” and that 50% is the deal. In addition, Trump threatened to impose a 25% tariff on all smartphones made outside of the US starting at the end of the June. The tariff would target phones made by Apple, Samsung, and others, and would impact virtually all smartphones sold in the US.

Economic Commentary

US economic activity improved in May with both manufacturing and service sector activity accelerating from April. Despite the improvement, export orders continued to contract reflect ongoing uncertainty surrounding US trade policy. Helping to offset the decline was an uptick in domestic orders. Reflecting the impact of tariffs, prices charged for goods and services rose to their highest level since August 2022. Employment in both sectors contracted for the month.

Housing data continued to point to mixed conditions. New home sales jumped 10.9% in April, far better that economists had been expecting, while reaching their highest annualized pace since February 2022. Sales were aided by builders lowering prices, with the median new house price falling 2% from a year ago to $407.2K. A glut of inventory, which remains at levels last seen in 2007, likely spurring builders to cut prices. Existing home sales dropped 0.5% in April to a six-month low. Compared to a year ago, sales slid 2.0% to an annualized pace of 4.0M, the slowest April pace since 2009. At the same time inventory increased 9.0% from March to end April at 1.45M. Despite the increase, the median price rose slightly, up 1.8% from a year ago to $406.6K.

Weekly jobless claims were largely unchanged at 227K, suggesting little immediate upward pressure on unemployment. Continuing claims rose slightly to 1.91M, their second highest level since late 2021, suggesting it is taking longer for unemployed individuals to find new employment opportunities.

Of Note

Through Friday, 96% of S&P 500 companies had reported 1Q25 earnings. Thus far, 78% have beaten their consensus estimate. According to industry group FactSet, consolidated earnings growth for the quarter is expected to be 12.9%.

Market Indices (As of 05/23/2025)

• Core PCE Inflation
• Personal Income & Spending
• Consumer Sentiment
• Consumer Confidence
• Pending Home Sales
• Durable Goods Orders
• Initial Jobless Claims