S&P 500 Mixed Amid Trade Concerns and Earnings Reports

The mixed closing of S&P 500, Dow, and Nasdaq signals swinging investor sentiment. Trade unease with China and positive earnings reports create a complex outlook for stocks in the near term.

Date: 31-05-2025

AI Rating: 7

Market Overview
The recent report outlines a mixed day for major stock indexes, primarily driven by ongoing tensions regarding US-China trade policies. Concerns were initially amplified as Treasury Secretary Bessent commented on stalled trade talks and accusations of tariff violations by President Trump. However, a bit of relief emerged when Trump suggested he might speak with President Xi, hoping for a resolution.

Impact on Earnings and Economic Indicators
The earnings reporting season has been notably robust—with over 90% of S&P 500 companies reporting and 77% exceeding expectations, the highest percentage since Q2 of 2024. The average earnings growth in Q1 stands at +13.1%, surpassing earlier estimates of +6.6%. This serves to provide a strong underlying support for stock prices in the near term. Companies like Ulta Beauty and Zscaler demonstrated significant earnings surpassing consensus estimates, reflecting positively on their future stock performance. However, the forecast for full-year 2025 profits has been adjusted to +9.4%, down from an earlier estimate of +12.5%, which may raise caution among investors.

Additionally, April personal income rose more than anticipated, +0.8% m/m against an expected +0.3%, indicating consumer health which is vital for GDP growth. Although the May Chicago PMI showed a sharp unexpected decline to 40.5, the upward revision in consumer sentiment casts a slightly favorable light.

Interest Rate Outlook
Comments from Fed officials indicate a dovish stance regarding interest rates, with the markets only assigning a 5% chance of a rate cut in June. The mixed economic indicators and subdued inflation allow for some optimistic projections on Fed’s monetary policy.

While interest rates remain a focus, the significant increase in personal income could also signal upward wage pressures. Investors must consider both inflation and interest rate trajectories as they make investment decisions going forward.

Conclusion

Stocks: ULTA ZS COST REGN COO GAP EMN