The final trading week in May as conflicting court rulings surrounding tariffs created some temporary volatility. There were also a few scheduled news events that market participants were eagerly anticipating.
The first scheduled news announcement came out Tuesday morning when the CB Consumer Confidence report was issued. It found that sentiment rose significantly over the past month, jumping to 98 from 85.7 just a month ago.
On Wednesday afternoon, the minutes from the most recent FOMC meeting were made public. The main takeaway is that officials are still unsure how tariffs will impact the economy. Although indications are that prices are not increasing in a meaningful way, there is still a possibility that economic conditions change rapidly. Therefore, FOMC members will likely have tough decisions regarding fiscal policy as they must choose to either accept data at face value or keep rates where they are to create long-term flexibility.
On Thursday, preliminary gross domestic product data for the first quarter came out. It revealed that the economy likely contracted by .2 percent during the first three months of the year. However, this beat expectations of a drop of .3 percent. Unemployment claims were also released Thursday morning and found that 240,000 requests for benefits were made compared to an expected 227,000.
Friday saw the release of the Core PCE Price Index, which is the Fed’s preferred inflation gauge. On a monthly basis, it increased by .1 percent, which was consistent with expectations. Meanwhile, the most recent consumer sentiment and inflation expectation reports were released by the University of Michigan. Consumer sentiment rose slightly to 52.2 from 50.8 last month while respondents believe that inflation will be at 6.6 percent in 12 months.
On Wednesday, the federal U.S. Court of International Trade ruled that tariffs issued per the International Emergency Economic Powers Act (IEEPA) were invalid. The IEEPA was used to justify the reciprocal tariffs issued on April 2. However, the decision was reversed on appeal Thursday pending further legal action, and even if the injunction were to stand, the president would have other legal avenues to impose duties on foreign goods.
The S&P 500 was up 2.55 percent over the past five trading days to close at 5,911. This represents a gain of 147 points for the index that spent most of the week gaining ground. On Tuesday, it opened at its low of the week of 5,867 peaked on Wednesday at 5,933 following the release of the FOMC minutes.
The Dow was up 2.24 percent over the past five days to close at 42,270 on Friday. That represented a gain of 926 points for the index that remained stuck in a trading range after breaking out on Tuesday. The market made a low of 41,970 on Tuesday morning and a weekly high of 42,4426 on Wednesday.
Finally, the Nasdaq was up 2.38 percent over the last five trading days to finish at 19,113. The index made its high of the week on Thursday morning reaching 19,273 before reversing and hitting its low of the week 18,870 the following day.
In international news, Canada announced on Friday that its GDP was up by .1 percent on a monthly basis. On Tuesday night, Australia announced that its inflation rate was 2.4 percent on an annual basis. Also on Tuesday night, New Zealand announced that it was cutting its key interest rate from 3.5 percent to 3.25 percent.
The upcoming week is sure to be another interesting one for market participants as there will surely be more questions surrounding the implementation of tariffs. A few scheduled news announcements include the monthly nonfarm payroll readings in addition to the JOLTS report and a speech from Jerome Powell.