Equity Markets Closed Higher Despite Reignited U.S.-China Trade Tensions

Despite a dip at the end of the week, stocks closed last week higher as investors digested renewed trade tensions with China, while inflation showed signs of cooling. Each of the benchmark indexes ended the week higher, riding solid gains in tech shares. All of the market sectors closed the week with gains, with notable advances in information technology, consumer discretionary, real estate and financials. Long-term bond yields declined. Crude oil prices fell for the second week in a row. The dollar continued to slip lower, while gold prices fell as traders moved from safety to risk.

First Quarter GDP Declined on Increased Imports, According to Revised Estimate

According to a revised estimate from the Bureau of Economic Analysis, gross domestic product (GDP) decreased at an annual rate of 0.2% in the first quarter of 2025. In the fourth quarter of 2024, GDP increased 2.4%. Compared to the fourth quarter, the downturn in GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, a deceleration in consumer spending, and a downturn in government spending that were partly offset by increases in investment and exports. Personal consumption expenditures (PCE), a major component in the calculation of GDP, rose 1.2% in the first quarter, compared to an increase of 4.0% in the fourth quarter. In the first quarter, consumer spending on goods ticked up 0.1% (6.2% in the fourth quarter), while spending on services rose 1.7% (3.0% in the fourth quarter).

Eye on the Week Ahead

The jobs report for May is out this week. April saw employment increase by 177,000, while average hourly earnings rose 0.2% for the month.