Weekend Update, May 12th, 2025
Index, Sector & Asset Performance
V-Bottoms are made: This weekend, the U.S. and China agreed to roll back their trade war for 90 days and negotiate a trade deal. America’s 125% reciprocal tariff on Chinese goods will be lowered to the 10% universal levy and the 20% fentanyl tariff will remain. China’s retaliatory 125% tariff on the U.S. will be lowered to 10%. North America S&P 500 futures are trading +2.9% higher while the tech-heavy, growth-oriented NASDAQ 100 is almost +4% higher this morning. This thawing is causing the bond market to sell off, expectations of Fed interest rate cuts lower, and interest rate yields up along the curve from +4.9 bps at the back end (10 to 30-years) and +12.3 bps on 2-years. The higher yields are helping, causing the dollar to rise. On the geopolitical front, the India-Pakistan ceasefire remains fragile. Zelensky invited Putin for peace talks in Turkey.
The S&P 500 Advance-Decline Line is at its highest level ever, which indicates that market internals are stronger than much of the financial media’s commentary. This type of strength supports the potential for a sustainable rally moving forward.
Industrials gained the most again last week, up +1.1% led by Boeing and GE Aerospace, up +3.5%. Rockwell Automation rallied +16.2%.
Utilities were up +0.6% for the period led by growth-oriented Constellation Energy and AES Corp, up +9.8% and +9.2% respectively.
Healthcare was the biggest loser on the week, down -4.2%. Several healthcare companies reported weaker-than-expected quarterly results, and the sector remains a target for the current Trump administration’s price cuts. Sharp selloffs in Vertex Pharmaceuticals (-15.2%), Regeneron Pharmaceuticals (-12.9%), and Moderna (-12.2%) were the three biggest laggards for the week.
Year to date, utilities are still leading up +6.0%, while Consumer Discretionary (think AMZN and TSLA) is down -9.8% since the end of 2024.
A summary of last week’s returns ex-Gold, from FS Investments shows Europe leading. Almost all sectors and countries rose last week.
Interest rates rose as the Fed ruled out preemptive rate cuts. The FOMC held rates steady. The market now prices about 2 cuts in 2025, followed by two in 2026. The 10-year Treasury yield ended the week at 4.38% as markets have reduced recession probability somewhat.
Economic Indicators and Earnings Commentary
U.S. large caps again handily beat earnings expectations in Q1, growing EPS +13% y/y, but many companies pulled guidance amid tariff-related uncertainty.
Last week, the Federal Reserve warned of rising stagflation risks and signaled that monetary policy would remain on hold until there was more clarity on the Administration’s policies and their economic impacts.
This week’s economic data releases include April reports on the CPI (Tuesday), retail sales and industrial production (Thursday), and housing starts (Friday).
Commodities and Currencies
Crude prices rallied last week, rising above $60/bbl on trade deal hopes. U.S. rig counts declined again last week as U.S. producers dealt with prices near their breakeven. OPEC+ appears to want to increase production this year, capping oil upside short-term.
Gold has declined toward $3,250 over the past couple of weeks as investors have moved into risky assets. Gold and miners are sinking this morning on a flight out of safety into equities.
Bitcoin had a sharp rally, climbing over $104,000, the highest level in over two months.
The U.S. dollar looks to have troughed near 100, at peak US “Unexceptionalism,” down -10% from it’s December 2024 highs.
Oak Harvest Weekly Stock Talk
Stocks Rebound, April Showers Bring May Flowers
Past performance has no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses, or sales charges. The preceding discussion is for informational purposes only. Investing involves risk and no reference to any security listed above should be considered a buy or sell recommendation. Advisory services are provided through Oak Harvest Investment Services, LLC, a registered investment adviser.
