Last week was a whole lot of nothing for the first three days until NVIDIA (NVDA) released its 1Q2025 earnings after the bell on Wednesday, serving up a tasty cocktail of better-than-expected earnings, improved guidance, and a “cherry on the cake” in the form of a dividend increase and a 10-for-1 stock split (earnings release from NVDA investor website here). Naturally, the stock took off like a rocket in the post-market, and increased 12.1% the remainder of the week as the company’s market cap surged above $2.6 trillion. For context, if NVDA were a country, it would be the 8th largest in the world, with a market cap just below the annual GDP of France ($2.8 trillion) and well above the GDP of Russia ($2.2 trillion). As amazing as the results of NVDA were, they were trumped on Thursday by continued economic data suggesting “higher for longer” in the US.
On Thursday morning before the open, PMI data was released in the US, with both manufacturing (50.9) and services (54.8) PMI coming in above consensus. Both preliminary reads were increases vis-à-vis April. S&P Composite Flash PMI data for April is here.
First time jobless claims for the week ended May 18, also released on Thursday morning, were slightly better than anticipated (215,000 vs 220,000 expected).
Minutes from the last FOMC meeting (April 30-May 1) released on Wednesday (here) indicated that the Federal Reserve remains troubled by persistent inflation, nothing new but simply a confirmation that inflation remains problematic and the anticipated pivot remains a ways off.
Better-than-expected economic data led to US equities fading throughout the day on Thursday as ongoing inflation concerns pushed yields higher across the curve. The fade was most pronounced in the indices that do not include NVDA, namely the Russell 2000 and the DJIA, both of which were down sharply on the day. However, as has been the case throughout the steady rally in stocks since October, investors showed that they have short memories. The pain on Thursday was quickly forgotten, and it was back to the races on Friday, with all of the US indices racing higher as yields stabilised and investors moved on.
Analysts revisions
I found the graphic below interesting, which was used by John Authers’ (Bloomberg Opinion) in a mid-week article entitled “Why the S&P is One Up on Wall Street”. The illustration shows how Street analysts have been forced to revise their year-end targets higher, since the S&P 500 has already exceeded most analysts’ end of year projections provided in December.
There’s nothing wrong with changing one’s mind – people do it all the time, and they should as new information as it comes available. What is apparent though is how poor the predictive power is of analysts and investors. Perhaps a coin toss would work just as well!
UK political surprise and economic data
In the UK last week, the biggest news was the announcement by PM Rishi Sunak to call a snap election on July 4th, an election in which the Conservatives are almost certainly going to lose. Assuming they do, Labour would take control of Parliament for the first time since 2010. It was an unexpected and rather strange decision, and hopefully the coming days will shed more light on why Mr Sunak took this surprise decision to move the election forward to the mid-summer.
As far as economic data, S&P Global/CPIS Manufacturing PMI in the UK was better than expected in April, firmly above 50, while services PMI was lower than expected, but still well above 50 (data here). However, retail sales were much poorer than expected in April, which was attributed to the weather (meaning a lot of rain). CPI came in for April at 2.3% YoY, much lower than anticipated, and consumer confidence was also a touch weaker. Pundits differ on what this means as to when the BoE might reduce its Bank Rate, but I would argue that the stage is set for a reduction at the June meeting, but certainly no later than the subsequent meeting on August 1.
European data and the next ECB meeting
Christine Lagarde and other ECB officials have more or less committed to a reduction in their policy rates at the next ECB meeting, scheduled for June 20th. Manufacturing PMI in the Eurozone remains firmly anchored below 50 (latest read 47.4, better than expected), although services PMI indicates ongoing expansion in services. The fact is that growth engine of Europe – Germany – remains particularly weak, although recent PMI data in France was poor, too. I suspect this, coupled with the last CPI read in the Eurozone (2.4% in April), sets the stage for a rate cut as economic growth needs a boost once the ECB is convinced that inflation is contained.
MARKETS LAST WEEK
The confluence of news mentioned above led a broad decline in equities across the globe, with the exception being the S&P 500 and the NASDAQ in the US, thanks to the amazing ascendency of NVDA shares during the latter half of the week. It is hard to argue that a breather was not needed after nearly all major indices tracked by EMC reached record levels during the last few weeks. Although it sounds like a broken record, ongoing data suggesting a resilient US economy, and this pushed US Treasury yields higher across the curve, a factor that seems to have short-term consequences but limited long-term effects on risk appetite. Corporate credit spreads remain reasonably stable, gold and oil prices fell, and perhaps not surprisingly, the US Dollar was a touch stronger due to the theme that has prevailed most of this year – US exceptionalism is leading to robust economic growth and persistent inflation, which in turns in likely to lead to higher yields for longer in the US vis-à-vis other developed markets.
Details for various indices and asset classes tracked by EMC can be found below in the section “The Tables” below.
THE COMING WEEKS
Monday is a holiday in the US and the UK. With markets closed, activity is expected to be muted as we start the week. There are a series of important central bank meetings coming in June, including an FOMC decision (along with revised Economic Projections) on June 12th, and rate decisions from the ECB and BoE on June 20th. The next monetary policy meeting for the Bank of Japan, facing an ever-weakening Yen, is slated for June 14th. It is almost certain that the Fed and BoJ will remain steadfast, and that the ECB will reduce its policy rates by 25bps. The Bank of England remains very much on the fence.
MY TRADES LAST WEEK
The only trade I did last week was to extend a hedge in the form of S&P 500 puts from June to December.
THE TABLES
The tables below provide detail across various global and US equity indices, the US Treasury market, corporate bonds and various other asset classes.
Global equities
US equities
US Treasuries
Corporate bonds (credit)
Safe haven and other assets
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