Weekly Market Update
Markets traded sideways this week as investors grew more cautious in response to the latest Fed commentary and rising bond yields. The S&P 500 gave up 0.4%, the Nasdaq retreated by 0.7%, and the Dow slipped 0.3%—a modest pullback after months of strong equity momentum.
The narrative this week shifted away from earnings and back toward interest rate expectations and bond market dynamics. With few major surprises in corporate reports, investors instead digested softer economic data and the Federal Reserve’s more measured tone.
Fed Minutes: Still Not in a Cutting Mood
The release of the Fed’s May meeting minutes highlighted an ongoing concern: inflation remains above target, and the committee isn’t prepared to make any policy pivots just yet. While no additional hikes are on the table for now, the Fed made clear that a cut isn’t a given either.
The bond market took notice. The 10-year Treasury yield climbed to 4.49%, up from 4.37% the week prior. Meanwhile, the 2-year yield rose to 4.94%, reflecting the market’s revised outlook: maybe one rate cut in 2025, instead of the two or three previously anticipated.
This move in yields pressured growth stocks and tech, while financials and defensive sectors saw relative strength as capital rotated.
Bond Market in Focus: Real Yields and Repricing
We’re seeing growing interest in short-duration bonds and TIPS (inflation-protected securities), as investors look to reallocate in a world where 4–5% yields may be more “normal” than temporary. The yield curve remains inverted but has flattened modestly, reflecting changing expectations.
Credit spreads in investment-grade corporates widened slightly, and appetite for risk in fixed income softened overall. The shift is subtle but signals that institutional capital is hedging against a more prolonged high-rate environment.
Economic Data: Cooling, Not Cracking
Economic releases this week continued to reflect a cooling trend, though the landing still appears soft:
Existing home sales dipped 1.8% in April to an annualized pace of 4.14 million. Mortgage rates near 7% remain a hurdle for both buyers and sellers.
Initial jobless claims came in at 214,000—better than expected and still indicative of a tight labor market.
S&P Global’s flash PMI showed services holding steady, while manufacturing contracted slightly, slipping just under 50.
Taken together, these releases suggest the economy is slowing but not faltering. The Atlanta Fed’s GDPNow model has pulled its Q2 growth estimate down to 1.7% from earlier projections around 2.2%.
Tech and AI Trade Cools—For Now
After an extended run fueled by enthusiasm around artificial intelligence, the tech sector saw modest profit-taking. NVIDIA, which reports earnings next week, declined slightly, while other AI-linked names like Palantir and AMD followed suit.
With expectations sky-high, next week’s report from NVIDIA could set the tone for the broader sector heading into June.
Looking Ahead
The final week of May brings important data, including the Fed’s preferred inflation gauge—core PCE—on Friday, as well as updates on consumer confidence and durable goods orders. We’ll also get a better read on how markets are positioning heading into the Fed’s June meeting.
At HDA Capital, we’re watching whether bond markets continue to firm, how sticky inflation proves to be, and if equities can hold their ground amid rising rate expectations.
| Date | Event | Why It Matters |
|---|---|---|
| May 28 | NVIDIA Earnings | Could reaccelerate or cool AI/tech momentum |
| May 30 | Durable Goods Orders | A key read on business investment |
| May 31 | Core PCE Inflation (April) | Fed’s preferred inflation gauge; key for rate outlook |
| June 3 | ISM Manufacturing Index | Signals U.S. factory activity and economic momentum |
| June 5 | ADP Private Payrolls | Early look at labor market ahead of NFP report |
| June 7 | Nonfarm Payrolls + Unemployment Rate (May) | Major Fed input; strong report could delay rate cuts |
| June 12 | CPI (May) | Market-moving inflation data; sets tone before FOMC |
| June 13 | PPI (May) | Measures wholesale inflation pressures |
| June 18 | FOMC Rate Decision + Fed Projections | Central event for the month—dot plot will drive reaction |
| June 28 | Final University of Michigan Consumer Sentiment | Snapshot of consumer confidence, inflation expectations |