Stock Market Remarkably Resilient

The financial markets faced a host of challenges last week, from US/China trade tensions to underwhelming employment reports to Elon Musk calling for President Trump’s impeachment and Trump calling for an end to Musk’s government contracts. But nothing was able to halt the market’s continuing rally from its April lows. The S&P 500 closed the week with a 1.6% gain, while the tech-heavy NASDAQ gained 2.3%. Since April 9, the benchmark S&P 500 Index has gained a whopping 20%, while the NASDAQ has surged more than 25%.

The week started with continued trade concerns. China and the US accused each other of breaching a temporary trade agreement, while the EU cautioned that increased tariffs on steel and aluminum would complicate ongoing trade negotiations. Domestic steel stocks rallied sharply on the news of 50% higher steel tariffs. But the broader market pushed slightly higher, as well, with investors seemingly desensitized to the ongoing tariff tensions.

A disappointing mid-week jobs reports did slow the market’s momentum a bit. Payroll provider ADP reported that private sector payrolls increased just 37,000 in May. The increase represented the smallest jump since March 2023, and signaled slowing momentum for the overall economy. Odds of a Fed rate cut ticked higher on the news, as President Trump rage-tweeted “Powell must now LOWER THE RATE”. Fortunately, the non-farm payroll report released on Friday came in slightly better than expected, with the report showing 139,000 new jobs created in May. The odds of a Fed rate cut reversed course on the news, with the odds of summer cut dipping to just 25%.

Perhaps the biggest headline of the week, though, was the sudden feud between Elon Musk and President Trump. Musk started the spat by criticizing Trump’s tax bill for increasing the budget deficit. Trump countered by threatening to pull government contracts from Musk. And back and forth it went. The impact was primarily felt by Tesla, which slumped 14% Thursday before clawing back 5% Friday. But the story could have legs for investors, as Musk could influence the direction of the tax bill, which extends tax cuts and could provide a boost to certain equity sectors. But for now, this is more smoke than fire.

Looking ahead, tariffs and trade will continue to move markets. China and the US are slated to meet in London this week to resume trade talks. And we’re less than 30 days from the end of President Trump’s 90-day pause on reciprocal tariffs. We’ll also get a look at whether new base-line tariffs are pushing inflation higher when fresh readings on consumer and producer prices are released later in the week.