Market Rebound Leaves S&P 500 Just Shy of All Time Highs

Performance for Week Ending 5.16.2025:

The Dow Jones Industrial Average (Dow) added 3.4 percent, the Standard & Poor’s 500 Index (S&P 500) gained 5.3 percent, and the Nasdaq Composite Index (Nasdaq) finished up 7.2 percent. Sector breadth was positive, with all 11 S&P sector groups closing higher. The technology sector (+8.1 percent) led the way, followed by consumer discretionary (+7.7 percent), and communication services (+6.6 percent).

*See below for Index Definitions

MARKET OBSERVATIONS: 5.12.2025  – 5.16.2025

The S&P 500 finished the week solidly higher, led by the mega-cap tech space, following the temporary suspension of tariffs on China, reports that showed inflation remained in check, and growing hope a recession will be averted. This week’s gains left the S&P 500 just 3 percent below its record high set in mid-February.

Fed Speak: Atlanta Fed President Raphael Bostic said he expects the U.S. economy to slow this year but not to fall into recession and reiterated that he sees one interest rate cut in 2025. Bostic also said economic growth could come in at 0.5–1 percent this year, as uncertainty and concerns about the outlook weigh on consumers. Fed Vice Chair Philip Jefferson said, “If the increases in tariffs announced so far are sustained, they are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation,” adding “With the increased risks to both sides of our mandate, I believe that the current stance of monetary policy is well positioned to respond in a timely way to potential economic developments.” Separately, in an interview with NPR, Chicago Fed President Austan Goolsbee said, “It’s important to remember that the Fed, our job is to be the steady hand, not respond to the daily gyrations either of the stock market or of policy pronouncements.” Lastly, in an interview with Market News International, former Dallas Fed President Robert Kaplan said Fed officials appear likely to await further clarity on an economic outlook muddled by evolving trade tensions before cutting interest rates further. Kaplan said he expects the economy to soften but not buckle under the threat from rising tariffs and trade tensions.

Q1 Earnings: Through Friday, 462 members of the S&P 500 have released fiscal quarter results, with just over 77 percent beating expectations. Aggregate earnings for this group are up 11.9 percent, mildly below the 13 percent projected growth rate for the overall quarter. On the sector level, communication services and consumer discretionary companies are posting the biggest upside earnings surprises, while the strongest growth rates are in the healthcare (+45.8 percent) and communication services (+30.6 percent). Full year growth rates have been trending lower in recent weeks due to the uncertainty surrounding the tariff situation. For 2025, the growth rate is currently estimated at 7.4 percent, down from 12.5 percent at the start of the year. For 2026 analysts are looking for growth of 13.1 percent, down from 13.7 percent.

Economic Roundup: On the inflation front, the Labor Department reported that consumer prices rebounded moderately in April, with headline inflation increasing 0.2 percent last month after dipping 0.1 percent in March. Economists polled by Bloomberg had forecast that the CPI would rise 0.3 percent. On a year-over-year basis, headline inflation advanced by 2.3 percent, the lowest level since February 2021. Meanwhile, producer inflation chilled more than expected in April, with business-level inflation contracting 0.5 percent month over month. Core PPI inflation in April also fell 0.4 percent, with annualized core business inflation easing to 2.4 percent from a year ago from the previous period’s 2.7 percent. In other economic news, sentiment among U.S. small businesses deteriorated for a fourth straight month in April as firms grew more downbeat about the economic outlook and sales prospects amid higher tariffs. The National Federation of Independent Business optimism index dropped 1.6 points to 95.8, the weakest reading since October. Six of the survey’s 10 components decreased, led by a slide in expectations for business conditions and a pullback in job openings.

The Week Ahead: Overall, it will be a relatively quiet week on both the data and earnings front. The focal point of the economic calendar will be the S&P manufacturing and services PMI reports for May on Thursday. The April reports showed little impact from tariffs, so the May date will be watched closely to see if that's changed. Current median estimates on Bloomberg suggest both the manufacturing and services indexes will see a modest downtick on a month-over-month basis. Other data reports of interest include jobless claims and existing home sales. The earnings calendar will continue to wind down with just 15 members of the S&P 500 expected to release results. Amongst this group will be retailers Home Depot, Target, Lowe’s, and TJX Companies. It will be a very busy week for Fed members, with 16 appearances on the docket. The Atlanta Fed will also host its annual Financial Markets Conference in Amelia Island, Fla.

— By Michael Schwager, Chief Market Strategist, Managing Director

Definitions

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since Oct. 1, 1928.

Wilshire 5000 Total Market Index^SM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500^© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Nasdaq Composite Index is a broad-based capitalization-weighted index of stocks in all three Nasdaq tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of Feb. 5, 1971.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.