Market Update – June 2nd, 2025

Financial Markets

Stocks climbed in the shortened holiday week as signs of easing inflation from the PCE report, positive Nvidia earnings, and a slight upward revision to first-quarter GDP boosted sentiment. By Friday, May 30th, the Nasdaq rose 2%, the S&P 500 gained 1.9%, the Dow added 1.6%, and the Bloomberg Barclays Aggregate Bond Index rose 0.9% in the week, helping cap a strong month for equities as markets continued to recover from April’s sharp sell-off.

Source: Zacks

Market News

PCE Inflation

April’s PCE report showed further signs of cooling inflation, with both headline and core PCE rising just 0.1% month over month. Year-over-year, headline inflation came in at 2.15% and core at 2.5%, slightly below expectations. Along with the earlier CPI data, this suggests inflation pressures remain contained, and tariff-related costs have yet to show up meaningfully in prices.

Source: Y-Charts

Personal Income, Spending, Saving

April’s personal income, spending, and savings data, released alongside the PCE inflation report, pointed to a more cautious consumer amid economic concerns. Personal income rose by a solid 0.8%, but spending growth slowed to 0.2% for the month. This led the personal savings rate to climb to 4.9%, reflecting a growing consumer preference to save rather than spend.

Source: US Bureau of Economic Analysis

Durable Goods Orders

In April, demand for durable goods dropped sharply as companies aimed to avoid tariffs, reversing the pre-tariff surge seen in March. New orders fell 6.3% for the month, with transportation equipment leading the decline—dropping $20.3 billion or 17.1% after four consecutive months of gains. However, when excluding transportation, new orders showed a modest increase of 0.2%, indicating some underlying stability in other sectors.

Source: US Census Bureau

Q1 GDP Second Estimate

The BEA’s second estimate for Q1 2025 showed the economy contracted at an annual rate of 0.2%, a slight improvement from the initial estimate of a 0.3% decline. This revision reflected stronger investment, government spending, and exports. However, consumer spending was revised lower, and imports, which are a subtraction from GDP, were revised higher, offsetting some of the positive adjustments.

Source: US Bureau of Economic Analysis

Nvidia Earnings

Nvidia reported better-than-expected earnings and revenue last week, giving the stock an early boost before settling by the week’s end. Despite facing headwinds from lower sales, higher expenses, and tighter margins tied to new export restrictions on chip sales to China, the stock has rebounded more than 40% from its early April lows. Year-to-date, Nvidia shares are roughly flat.

Source: Y-Charts

Consumer Confidence

 Consumer Confidence rebounded in May, snapping a five-month streak of declines, according to the Conference Board. The improvement was driven largely by a rise in the expectations index, with a modest uptick in consumers’ assessment of current conditions. The rebound was broad-based, with gains seen across all age and income groups, and across political affiliations.

Source: The Conference Board

Summary

Markets ended May on a strong note, supported by easing inflation data, better than expected Nvidia earnings, and a slight upward revision to first-quarter GDP. April’s PCE report confirmed cooling price pressures, while consumer spending softened and the savings rate rose, pointing to more cautious household behavior. Durable goods orders fell, largely due to a drop in transportation equipment. May consumer confidence improved as inflation remained contained and concerns over tariff impacts began to ease.

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