May 21st, 2025
Market Performance:
- Another quiet day on the economic front didn’t stop stocks from going lower Tuesday morning. Most sectors of the S&P 500 opened lower and around 94% of companies in the S&P 500 have reported earnings.
- Reports have surfaced that the House of Representatives is making progress on the reconciliation bill and there may be a vote later today. Will be interesting to see how the markets react if there is.
- Markets in Europe also traded lower following a higher than anticipated inflation reading out of the UK and Asian markets were mixed.
- Bond yields moved higher with the 2-year Treasury yield opening around 4%. The 10-year Treasury yield opened around the 4.55% mark.
- Oil went higher by 0.7% in early trading on a report that Israel might target Iran’s nuclear facilities.
Economic Takeaways:
UK inflation soared in April resulting in the Bank of England slowing its already slow pace of interest rate cuts.
The annual inflation rate hit 3.5% in April. This was the highest reading since January 2024. The increase from 2.6% in March was the largest between two months since 2022 when price growth was rocketing above 10%.
According to a Reuters poll of economists, the number expected was 3.3% for April. The Bank of England earlier this month had projected consumer price inflation of 3.4%.
Britain now has the second-highest inflation rate of any major Western European economy coming in second to the Netherlands.
Finance minister Rachel Reeves said in disappointment, “We are a long way from the double-digit inflation we saw under the previous administration, but I’m determined that we go further and faster to put more money in people’s pockets.”
Allan Monks, an economist at JP Morgan, said the data called into question the likelihood of a rate cut over the summer.
“The surprise will reinforce the BoE’s hawkish bias,” Monks said in a note to clients. “The door to a June cut appears shut and the likelihood of an August cut (still our base case) has shifted lower.”
Meanwhile in the U.S., The Feds are currently holding steady on interest rates, but there are expectations for cuts later in 2025.
While the Fed has signalled that they are not in a rush to cut, they are closely watching economic data and inflation, which could lead to adjustments. Market expectations suggest potential rate cuts in the coming months, but the timing and extent of those cuts remain uncertain.
Atlanta Fed President Raphael Bostic told CNBC earlier this week that he currently prefers only one rate cut this year as the central bank tries to balance potential upward pressures on inflation with worries of a recession.
As of early Wednesday, futures trading indicated just a 2% chance of a Fed rate cut in June, and 26% in July, according to the CME FedWatch Tool. The mid-September meeting is the first where futures indicate a better than 50% chance of a cut.
Top Gainers:
WeRide, Inc. (WRD)
Dycom Industries, Inc. (DY)
XPeng, Inc. (XPEV)
GDS Holdings Limited (GDS)
Hesai Group (HSAI)
Belite Bio, Inc. (BLTE)
Summit Therapeutics, Inc. (SMMT)
Arcellx, Inc. (ACLX)
Orla Mining, Ltd. (ORLA)
Weibo Corp. (WB)
Top Losers:
Fair Isaac Corp. (FICO)
Wix.com Ltd. (WIX)
V.F. Corp. (VFC)
Garrett Motion, Inc. (GTX)
QXO, Inc. (QXO)
Regencell Biosciences (RGC)
Modine Manufacturing (MOD)
Oscar Health, Inc. (OSCR)
Reddit, Inc. (RDDT)
Lemonade, Inc. (LMND)
Moderna, Inc. (MRNA)
Notables:
- Target (TGT) shares fell 3.2% ahead of the open following a disappointing earnings report. Quarterly sales at stores open a year or more fell 3.8%. The retailer now expects fiscal year earnings per share of $7 to $9, down from the previous range of $8.80 to $9.80. Earnings per share and sales for the most recent quarter both missed average Wall Street estimates.
- Lowe’s (LOW) rose 2% ahead of the open as the company kept its full-year forecast, beat analysts’ earnings expectations. It did miss the average analyst revenue estimate.
- Travel stocks including Delta Airlines (DAL), Norwegian Cruise Line Holdings (NCLH), and Wynn Resorts (WYNN) were lagging ahead of the bell.
- Toll Brothers (TOL) gained 3.8% ahead of the open after the home builder delivered positive earnings and reiterated its guidance for the year.
- Baidu (BIDU) soared 2.4% in early trading after topping analysts’ earnings and revenue expectations. The Chinese tech company touted its AI business’s performance.
- Tesla (TSLA) rose 0.5% after CEO Elon Musk said he’d remain in his position long-term and would cut political spending according to a Barron’s report.
- Palo Alto Networks (PANW) sank 4% despite narrowly beating Wall Street’s earnings and revenue estimates and guiding for slightly better-than-expected fiscal fourth quarter earnings.
- Canada Goose Holdings (GOOS) gained a stellar 14.3% after the luxury retailer beat analysts’ earnings and revenue estimates.
- UnitedHealth Group (UNH) fell 6.2% in pre-market trading as the battered healthcare company received a downgrade from HSBC, which said shares of the healthcare company still aren’t cheap despite recent downward moves.
Tech Earnings Will Take the Spotlight Next Week
Chipmaker NVIDIA (NVDA) is scheduled to report on May 28.
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