2025 Week 24

1. Stocks Continue Upward Momentum

U.S. equity markets extended their gains for a second straight week, with major indexes rising between 1% and 2%, reaching their highest levels in over three months. While the S&P 500 still trades slightly below its all-time high, investor sentiment remains buoyant amid ongoing macro resilience and supportive corporate fundamentals.

Key Takeaway: Equities remain in an upward trend, fueled by solid data and strong earnings expectations.

2. Labor Market: Cooling, Not Cracking

May’s employment report showed the economy added 139,000 jobs—slightly above expectations. However, revisions to prior months trimmed 95,000 jobs from earlier estimates, suggesting a more moderate pace of hiring. The unemployment rate held steady at 4.2%, with healthcare and hospitality sectors leading job creation. Manufacturing and federal employment declined, reflecting pressure from tariffs and fiscal tightening.

Key Takeaway: The job market is gradually cooling but remains strong enough to support consumption and growth.

3. Fed Holds Steady as Cut Expectations Shift

Following the jobs report, interest rate futures continued to price in two rate cuts by the end of 2025, with the first expected in September. However, the Fed is unlikely to act at its June or July meetings. The labor market’s durability, along with sticky core inflation, reinforces the case for patience in monetary policy.

Key Takeaway: The Fed remains on hold as markets anticipate a cautious path toward easing later this year.

4. Oil Rebounds on Supply Concerns

Crude prices surged over 6%, rebounding from recent declines and marking the highest level in six weeks. Renewed supply concerns and geopolitical risks fueled the rally, even as overall demand signals remain steady.

Key Takeaway: Energy markets are showing renewed volatility, which could impact inflation expectations.

5. Defensive Sectors Lag Despite Market Gains

Consumer staples and utilities underperformed, each declining 1.5% and 1.0%, respectively. These traditionally defensive sectors fell out of favor as investors rotated toward growth-oriented areas benefiting from resilient earnings and economic data.

Key Takeaway: Sector rotation is favoring cyclical and growth assets over defensive plays in this environment.

6. Volatility Retreats to Pre-Crisis Levels

The Cboe Volatility Index (VIX) declined for the eighth time in nine weeks, falling to 16.8 from 18.6. This marks a dramatic drop from its recent peak in April, reflecting increased investor confidence and lower perceived market risk.

Key Takeaway: Volatility has normalized, pointing to a more stable risk environment.

7. Small-Caps Outperform—But Still Lag YTD

Small-cap stocks outpaced their large-cap peers with a 3.2% weekly gain versus 1.6%, yet they continue to underperform on a year-to-date basis. The rally suggests growing investor interest in broader market participation, although sustained momentum remains to be seen.

Key Takeaway: Small-caps are gaining traction, but broader confirmation is needed for a lasting rotation.

8. Inflation in Focus with CPI Report Ahead

All eyes turn to the May CPI release next week. April’s data showed a moderation in annual inflation (2.3%) and stable core inflation (2.8%). Any further easing could strengthen the case for rate cuts in the fall.

Key Takeaway: The upcoming CPI data could play a pivotal role in shaping Fed expectations and market sentiment.

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Next week’s spotlight: May’s CPI data and key Fed commentary ahead of the June policy meeting.