The Setup & Where to Focus

Stocks rallied to close out what was the best May since 1990 for US large caps. 

• The S&P 500 rose 1.9% over the holiday-shortened week, with all of the gains coming on Tuesday, following a positive reaction to President Trump backing away from the high 50% tariff rate on Europe floated the previous Friday. 

• Equities then wobbled from Wednesday through Friday, with earnings from NVIDIA (NVDA), back-and-forth court orders on Trump’s tariffs, and dramatic statements made by the president on Truth Social filling the tape. 

• The SPX tacked on 6.15% in May after a tremendous April recovery.  

The Nasdaq Composite lifted 9.6% last month—its best performance since November 2023. 

• For the week, the group led by the Magnificent Seven ascended 2%. NVDA was in the spotlight, but shares of the chipmaker settled well off the high by Friday afternoon.

The Cboe Volatility Index (VIX) drifted lower, too. It closed the week under 19 despite further drama around trade policy and a busy data slate in the week ahead, including the May jobs report. 

• Historically, June has exhibited more volatility on average than May for the S&P 500. Since 2010, the S&P 500 has returned an average of 0.68% in June, with July and November being the best months.

Turning to the sectors, Real Estate (XLRE) was the quiet leading niche of the S&P 500, advancing 2.7% last week. 

• The property sector is the most exposed to changes in interest rates, and with a nine-basis-point drop in the benchmark 10-year Treasury note yield, it bounced back after a drubbing the previous week. 

• Real Estate also sports the highest dividend yield of all 11 sectors, but on a total return basis, XLRE remains 7% below its November 2024 all-time high. Still, some market participants are optimistic that increased demand for data centers and transmission facilities, driven by AI development, could potentially benefit the real estate sector.

• Away from that small slice of the market, the S&P 500’s biggest sector, Information Technology (XLK), outperformed modestly, up 2.4%, but it was the Mag 7 stocks that drove returns. Instead, second-tier large caps, such as Broadcom (AVGO), Oracle (ORCL), CrowdStrike (CRWD), and Palantir (PLTR) all rose sharply. 

The lone sector that was down on the week was Energy (XLE). 

• WTI crude oil continues to hover at low levels, near $60 per barrel. On Friday afternoon, Baker Hughes reported that the US rig count fell for a fifth consecutive week—which may indicate that depressed energy prices are influencing executives in the oil sector to make adjustments to production and exploration activities. 

Finally, a shoutout to the Industrials sector (XLI), as it nearly closed at a new all-time high last week. 

• Major gains in the Aerospace & Defense industry, along with continued fervor for AI, have helped the group, which is linked to changes in GDP growth expectations. 

• In May, the implied chance of a US recession dropped from 70% to 33%, according to the Kalshi prediction market.

The company-specific focus was certainly on NVIDIA’s earnings last Wednesday night, and Jensen Huang’s company posted robust numbers once again, despite announcing a $5.5 billion write-down related to China's chip curbs. The spotlight was also on smaller retail stocks. 

• Many names in the S&P MidCap 400 were unusually scrutinized, as they are perhaps the most exposed to tariffs. 

• The Gap (GAP) plunged on Friday after signaling that higher import duties could cost between $100 and $150 million, which could crush its margins for the year. 

• Best Buy (BBY) slashed its profit outlook last Thursday, citing tariff-related pressures and preemptive price hikes. 

• There were positive reports, though. Dick’s Sporting Goods (DKS) rallied more than 7% last week after issuing solid numbers after its announced acquisition of Foot Locker (FL). 

• On Friday, shares of Ulta Beauty (ULTA) lifted by the most since 2020, notching a 52-week high and leading the S&P 500 to finish the week. 

• All told, the SPDR S&P Retail ETF (XRT) gained 1.7%, actually touching its best mark since February. 

• More broadly, the S&P MidCap 400 ETF (MDY) inched up by 0.8%, and the iShares Russell 2000 ETF (IWM) tacked on 1.2%. Both MDY and IWM registered gains of 5% or more in May.

Attention was drawn to NVDA and what was happening in US retail, but international stocks just kept chugging along. 

• The Vanguard FTSE All-World Ex-US ETF (VEU) closed at an all-time high on the monthly chart, though the weekly climb was just 0.2%. 

• Its rally was tempered by a 2.7% decline in Chinese equities. The iShares China Large-Cap ETF (FXI) struggled first from poor earnings results from Temu parent PDD Holdings (PDD) on Tuesday and then from a tape bomb from the Oval Office. 

• President Trump put out a Truth Social Friday morning, calling out the world’s second-largest economy for “totally violating” its trade agreement with the US. “So much for being Mr. NICE GUY!” Trump wrote in the social media post. 

• China’s woes, of course, weighed on the Vanguard Emerging Markets ETF (VWO), which ended the week down 1.7%. International developed markets faired fine, though, rising about 1% to cap off a stellar May of their own.

Over in the bond market, lower interest rates mentioned earlier helped the iShares Core US Aggregate Bond ETF (AGG) to a 0.9% weekly return, building on an intraday low hit the previous week that was notched right about when Trump’s One Big, Beautiful Bill Act (OBBBA) was passed. 

• Demand for Treasuries has recently increased when the 30-year yield ventures above 5%, suggesting a current easing of concerns previously attributed to 'bond vigilantes'.

• In a perhaps peculiar turn of events, our team has spotted a negative correlation between stocks and bonds in recent sessions, which counters the media’s narrative of bearish price action in both asset classes. 

• Of course, it’s a global story, as well. Central bank action from the Bank of Japan to support its long-term sovereign debt helped to quell fears there (and for 30-year bonds globally, for that matter).

Commodities were generally quiet last week. 

• WTI is now down in back-to-back weeks, barely above the $60 mark, while US Henry Hub natural gas traders brace for what’s likely to be an above-average demand summer. 

• Hotter-than-normal temperatures and growing demand for power related to AI and data centers could potentially support demand in the gas market. 

• US retail gasoline prices remain below $3.20, which may be a positive factor for summer travelers and commuters. The typical pump price is below $3 for much of the country (sans the West Coast), and futures pricing on RBOB suggests we could see another drop soon. 

• In metals, gold lost 2% to close at $3,289. In crypto, bitcoin fell 5% to $103,500 after touching $112,000 at the May high. 

• As for the US Dollar Index (DXY), it is conspicuously quiet, ranging from 99 to 101 despite a volatile macro backdrop. A decline under the April low of 97.92 could stir volatility across asset classes.

Weekly Calendar Look Ahead

It has been a light two weeks on the data front, last Friday’s record improvement in the US good trade deficit notwithstanding. There was also good news on inflation, as indicated by the April Personal Consumption Expenditure (PCE) dataset released before the weekend. The core measure of the Fed’s preferred inflation gauge hit a four-year low of 2.5%, while the headline price rise of 2.1% was the tamest annual increase since last September. This week, it’s all about the employment situation. Also crossing the wires will be key Purchasing Manager Index (PMI) survey data, May vehicle sales, and nonstop Fed speak. Let’s get to it.

The first trading day of the new month marks the arrival of fresh Manufacturing PMI numbers. 

• The initial round comes from S&P Global at 9:45 a.m. ET, and we expect a solid expansionary print above 50. Now, this is a final read from the flash figure of 52.3 released two weeks ago. 

• The second batch, released from the Institute for Supply Management (ISM) 15 minutes later, is more pivotal to price action. The consensus calls for a weak 48.7 survey result, which would match the reading in May. The devil or delight will be in the details—our team will inspect the subindexes, including Employment, Prices, and New Orders, for a full business vibes check. 

• Construction Spending for April hits at the same time as the ISM PMI before the Fed’s Logan and Goolsbee speak later in the day.

Tuesday's macro diet is steady. 

• The action gets underway with the weekly Johnson Redbook view of US retail sales; the last look was strong at +6.1% YoY, even with tariffs trickling through the economy. Keep in mind that Memorial Day weekend features record TSA checkpoint numbers and record sales at the box office (though that may have been partly thanks to drabby weather in the Northeast). 

• The focus shifts back to jobs after the opening bell—the Job Openings and Labor Turnover Survey (JOLTS) for April won’t be a big mover, as it will likely show a continued loosening in the number of job openings per available worker. 

• April Factory Orders at 10 a.m., followed by more statements from Fed members, hit the tape. 

• Finally, May vehicle sales will offer clues on demand for high-ticket items during last month’s tariff flux.

Wednesday's key labor-market barometer will be the ADP Employment Change for May. 

• The consensus forecast is for a rise from 62,000 in April to 120,000 last month. It’s a volatile series, and its correlation to the Bureau of Labor Statistics’ establishment survey is notoriously weak. 

• The Fed’s Bostic speaks in the pre-market before Services PMIs arrive from S&P Global and the ISM. We expect both of those soft-data updates to show above 50, indicating growth in the less-cyclical services slice of the US economy. 

• We will also dig into the Fed’s Beige Book of regional economic activity that prints at 2 p.m. ET—there are always some gems in there that can cast color on the state of the macro.

Thursday could bring about volatility in the foreign exchange markets. 

• The European Central Bank (ECB) announces its interest rate decision at 8:15 a.m. ET before ECB President Christine Lagarde holds a press conference. 

• But in advance of monetary policy developments across the pond, we’ll get May Challenger Job Cuts. It will be a compelling update since March’s layoff sum skyrocketed to 275,000, but then April’s total was just 105,000. Allio figures the May number will be close to 100,000 in light of recent layoff announcements and stable Initial Claims. 

• Then comes April Balance of Trade data, which should confirm the April goods trade deficit change. Jobless claims are up next—last week’s announced 240,000 Initial Claims amount was higher than expected, but still no cause for alarm. By contrast, Continuing Claims notched another cycle high, and it has two million in its sights. 

• Data before the bell rolls on with Final Q1 Productivity figures, but it shouldn’t be too impactful since it's a second look. 

• Broadcom and Lululemon (LULU) could shake the chip and retail industries with their Q1 earnings reports.

Friday’s May jobs report is the macro highlight of the month. 

• Economists predict that 130,000 jobs were created last month, with the unemployment rate holding at 4.2%. Average hourly earnings are seen dropping further to 3.7%. 

• Revisions to the prior two months will be crucial to monitor, as well as changes in Average Weekly Hours worked, since that can be a bellwether of future bigger employment shifts. 

• Regardless of whether it's a hot or cold report, the Fed will be on hold when it meets next from June 17 to 18.

Fiscal Policy Framework

The tariff saga took many turns last week. The US Court of International Trade (CIT) ruled that President Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA) with his sweeping Liberation Day tariff impositions. The White House then swiftly put in an appeal to secure a temporary stay, so duties will continue to be collected until at least June 9. From there, the administration could invoke what’s known as Section 122 of the Trade Act of 1974, which allows temporary tariffs. Such a move would effectively buy time for more durable measures that could go into effect under Section 301. There’s also the Section 338 route, which allows up to 50% tariffs on “discriminatory” countries. 

Our analysis suggests that while uncertainty on the trade front has increased regarding revenue collection, various avenues may remain for the Trump administration to pursue its stated trade objectives. The CIT’s ruling may provide temporary relief to businesses while putting trade deals on hold, potentially until after next Monday; it might ultimately head to the Supreme Court. Keep in mind that July 9 is the reciprocal tariff deadline, all while US-China trade talks have stalled (for now). 

On Capitol Hill, Congress returns from recess with all eyes on what Senate Republicans will do with the OBBBA. The GOP holds a fragile majority, so there will be a delicate balance between tweaking what the House approved last month and not altering the tax and spending package too much. It is anticipated by some political analysts that the Senate may seek to boost tax breaks for small businesses and that disagreements are likely concerning spending cuts President Trump has set a July 4 deadline, although the bill is unlikely to be signed into law until very close to the government shutdown and debt-limit deadline, which some observers anticipate could be around August.

Risks & Opportunities

With the VIX under 19, there’s a degree of complacency priced into stocks with Jobs Week upon us. The Fed remains in wait-and-see mode, too, so if we get a weak payrolls report on Friday, it could be a “bad news is bad news” reaction. Keep in mind that June is not the friendliest month for the bulls. A popular media narrative currently is the 'TACO Trade' (Trump Always Chickens Out), referring to instances where initial strong policy stances are later moderated. This pattern has similarities to what has historically been termed 'buying the dip' in response to market reactions to policy announcements. Regardless, pullbacks have been shallow since the April 7 intraday low, even as global yields have jumped.

We'll be on guard for volatility in the international bond market. Last week was certainly a sigh of relief, but if long-duration fixed-income experiences a downturn, it could create a more challenging environment for equities to reach new highs. The ECB’s decision this week will be important, as well as comments from FOMC voting members on the speaking circuit. 

Strong leadership from AI stocks and Aerospace & Defense appears to be enough to keep the S&P 500 firm for now. The Mag 7 has also led, with the ETF tracking that group notching its best month ever. In short, the market is simply looking beyond tariff noise amid excellent corporate execution, driving shareholder returns on the back of the resilient US consumer.

Quick Hits

• The Atlanta Fed's initial GDPNow model estimate for Q2 2025 GDP growth is 3.8%, with models suggesting Q2's expansion rate could print above 3%; Goldman’s GDP tracker is currently +3.3% for the second quarter.

• The Citi Economic Surprise Index is now at a three-month high.

• Bloomberg reports that macro hedge funds are posting their worst YTD performance since at least 2004.

• The Goldman Sachs Social Media Sentiment measure of consumers is near an all-time high despite weak University of Michigan survey results.

• Goods imports fell by $68 billion in April, a record. The nearly 20% decline in imports was the largest in half a century.

• Corporate buyback announcements are pacing for a record year.

• TSA checkpoints crossed three million ahead of the Memorial Day weekend, a record print for the first half of a year.

• Gasoline futures are down 18% from 12 months ago as the summer driving season heats up.

• The All-Country World Index ETF (ACWI) closed at a record high last month, with both US and foreign bonds up on the year.

• The forward 12-month P/E ratio for the S&P 500 is 21.3. FactSet notes the P/E ratio is above the 5-year average (19.9) and above the 10-year average (18.4).

• The US Personal Saving Rate soared to 4.9% in April, the highest since May 2024.

This "Macro Economic Calendar: Week of June 2, 2025" is provided by Allio Advisors, LLC ("Allio Advisors"), an SEC-registered investment adviser, for general informational and educational purposes only. SEC registration does not imply a certain level of skill or training.

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