May 16, 2025

The market continued drifting mainly upward, with the stocks that have done the best recently, mainly the high-flying technology leaders taking the day off and those stocks that tend to lag when the former do better, taking the upward spotlight.

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As a result, the Dow ended with a nice upside gain of 271 to 42,322 led by those consumer staples issues like AMGN, CSCO on earnings, KO, DHW, GS, JPM which has been in its own upside world, BA, HD, HON, IBM, MCD, PG and V which was higher for the sixth straight session to an all-time high.

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The S&P started lower and then resumed its upside journey with a closing gain of 24 to 5916 led by the financials and industrials. It is now higher for the fourth straight session and within 3.7% of its all-time high set earlier this year. The Nasdaq ended down by 34 to 19,112 but the NDX, which contains mainly technology, managed to sneak out a small closing gain.

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The Russell 2000 index of small stocks rose 11 points on financial strength in small banks while the VIX continued to ease back to 17.83, way down from the unsustainable 60 level at the market bottom last month.

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Stocks got a lift from easing Treasury yields in the bond market. They fell after the economic reports suggested the Federal Reserve may have more room to cut interest rates later this year to bolster the U.S. economy if it weakens under the weight of high tariffs.

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But the reports did little to spell out whether the economy is falling toward a recession, as many investors had been fearing, or shaking off the uncertainty after Trump called off many of his tariffs temporarily. The April retail sales report  moved up by 0.1% and ex-autos and gas was ahead by 0.2% and April P.P.I. fell by 0.5% and ex-food and energy was down by 0.4%. Other updates said U.S. manufacturing looks like it is still contracting and 229K workers applied for weekly jobless claims.

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Even though China and the United States recently agreed on a 90-day relief period for many of their tariffs, the trade story still exists and is going to take time for this issue to be felt in the economic data.

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Such uncertainty showed itself in Dow component WMT stock, which slipped even though it reported a bigger profit for the latest quarter than analysts expected.

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Like other U.S. companies struggling through Trump’s on-again-off-again rollout of tariffs, the company said it decided not to offer a forecast for how much profit it will make in the current quarter.

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It said that “the range of near-term outcomes being exceedingly wide and difficult to predict,” though the company did say it expects sales to grow between 3.5% and 4.5%, not including the swings that shifting values of foreign currencies can bring.

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The nation’s largest retailer also said that it must raise prices due to higher costs caused by Trump’s tariffs.

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Equipment maker DE said it is seeing “near-term market challenges” and called the situation “dynamic,” as many other companies have. It lowered the bottom end of its forecasted range of profit for the full year. But Deere’s stock did rise after it reported a stronger profit for the latest quarter than analysts expected.

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Dow component CSCO also gained after the tech giant likewise topped expectations for profit. Analysts said they are optimistic about Cisco’s artificial-intelligence prospects.

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DKS dropped after it said it would buy the struggling FL chain for $2.4 billion. It also said that it made a better profit for the latest quarter than analysts expected.

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In the oil market, crude prices sank roughly 2% on expectations that more petroleum could be set to flow into global markets because of a possible deal between the U.S. and Iran over that country’s nuclear program. Such a deal could help ease sanctions against Iran, which is a major producer of oil.

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Elsewhere, China moved to reverse some of its “non-tariff” measures against the U.S. as agreed with Washington in their temporary trade war truce, while demanding that the U.S. side “immediately correct its wrong practices.”

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A Chinese Commerce Ministry spokesperson accused the Trump administration of violating world trade rules by announcing that use of Ascend computer chips made by China’s Huawei Technologies violates U.S. export controls.

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In the bond market, the yield on the 10-year Treasury fell to 4.44% from 4.53% late Wednesday. Falling bond yields can encourage investors to pay higher prices for stocks and other investments.

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The two-year Treasury yield, which more closely tracks expectations for Fed action, dropped to 3.96% from 4.05% as traders built bets that the Fed will resume cutting its main interest rate as soon as September.

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The Fed has been keeping its main interest rate on hold this year as it waits to see how Trump’s trade policies play out for the economy. Cutting rates would juice the economy by making it easier for U.S. households and companies to borrow and spend. But it would also push upward on inflation when worries are high that Trump’s tariffs will do the same thing.

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Fed Chair Jerome Powell warned in a speech on Thursday that the world “may be entering a period of more frequent, and potentially more persistent, supply shocks” that could force inflation higher and present a “difficult challenge for the economy and for central banks.”

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First-quarter earnings are starting to wind down with the following lineup this week: yesterday Dow component CSCO higher and component WMT lower in addition to CRWV; today - AMAT,  TTWO, CAVA lower and DE higher.

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Economic reports could have more of an effect with the following: yesterday - April PPI lower by 0.5% and excluding food and energy down by 0.4%, April retail sales up 0.1% and excluding autos and gas plus 0.2%, April industrial production down 0.4%,  weekly jobless claims unchanged at 229K; Friday – April housing starts were basically unchanged, May import prices were higher by 0.1% and mid-May U. of Michigan Consumer Sentiment Survey came in lower than expectations at 50.8 while the inflation expectations were way down at 7.3%.