Market Performance Overview
The stock market faced challenges heading into the weekend following President Donald Trump’s comments on Friday regarding China’s breach of a preliminary trade agreement established earlier this month. The S&P 500 ended Friday relatively unchanged, despite spending much of the day in negative territory. Nonetheless, the index showed growth both for the week and for May.
Key Influences on the Market
Tariffs were a primary focus this week, causing investors to remain vigilant. After Trump’s accusations on Friday morning, a Bloomberg report at lunchtime revealed that the Trump administration was considering expanding restrictions on Chinese tech firms, which contributed to a dip in the market. Later in the day, during a press conference in the Oval Office, Trump indicated he expects a discussion with Chinese President Xi Jinping, prompting the S&P 500 to recover much of its earlier losses. Overall, the index gained nearly 2% during this holiday-shortened week.
Monthly Gains and Investor Sentiment
The market demonstrated significant strength throughout May, with investors showing resilience to both positive and negative tariff news. The S&P 500 surged over 6% for the month, marking its best performance since November 2023. The traditional investment adage “sell in May and go away,” which suggests investors should exit the market during slower summer months, did not hold true this year.
Highlights from Earnings Reports
Nvidia emerged as a standout performer during earnings season, prompting an increase in its price target from $165 to $170 per share after reporting better-than-expected results and optimistic projections, despite facing export limitations on AI chips to China. While shares rose more than 3% on Thursday following the report, they gave back some gains on Friday. Salesforce also released positive quarterly results, yet its stock dropped by over 3% on Thursday and about 0.5% the next day.
Sector Performances
Costco delivered what Jim Cramer referred to as the “perfect quarter,” showcasing improvements in margins and same-store sales amidst tariff challenges faced by other retailers. After initial losses on Friday, Costco shares eventually rallied by 3%. Both Costco and Nvidia were among the top-performing stocks, while Salesforce struggled.
Investment Decisions and Portfolio Adjustments
During Tuesday’s market rally, we issued a trade alert to trim our position in Broadcom, realizing profits of 170% from shares bought in August 2023. This minor sale does not reflect a change in our long-term view; we still see growth potential in the custom AI chip designer. However, we did downgrade Broadcom to a rating of 2, indicating we are prepared to buy more shares if the price dips. Over the week, Broadcom shares rose nearly 6%, with a 26% increase in May alone.
Economic Indicators and Fed Actions
Inflation trends also influenced the market this week. The Federal Reserve’s preferred inflation metric released on Friday showed cooler-than-expected numbers for April, suggesting that inflationary pressures might be easing. However, uncertainty remains as final tariff levels are still undecided, which could reignite inflation concerns. The minutes from the Fed’s May meeting revealed worries over potential trade-offs regarding monetary policy as the economy evolves. Fed Chairman Jerome Powell met with Trump at the White House the following day to discuss economic outlooks, emphasizing that future monetary policy will depend on incoming data.
