Stocks Rise as Uncertainty Falls

Performance for Week Ending 6.27.2025:

The Dow Jones Industrial Average (Dow) finished up 3.8 percent, the Standard & Poor’s 500 Index (S&P 500) added 3.4 percent, and the Nasdaq Composite Index (Nasdaq) jumped 4.3 percent. Sector breadth positive, with nine of the 11 S&P sector groups closing higher. The communication services sector (+6.2 percent) was the best performer while energy (-3.5 percent) was the weakest.

*See below for Index Definitions

MARKET OBSERVATIONS: 6.23.2025–6.27.2025

The S&P 500 ended the week at a new all-time closing high, driven by easing of geopolitical tensions after a ceasefire between Iran and Israel, progress in U.S. trade negotiations, and a benign inflation report that supported hopes the Fed will reduce rates in the second half of the year. The Commerce Department reported a 0.1 percent rise in the Personal Consumption Expenditure (PCE) price index in May, aligning with Bloomberg estimates. On a three-month annualized basis, headline PCE increased only 1.1 percent, down from 2.3 percent in April. Following the report, Bloomberg’s World Interest Rate Probability tool indicated that traders now expect 65 basis points of total easing by the end of 2025, up from 51 basis points the previous week.

On the tariff front, White House spokesperson Karoline Leavitt played down the July tariff deadlines that have loomed over markets. Following the 90-day pause, July 8 is when the so-called liberation day tariffs are set to take effect and July 9 marks the deadline for the European Union to avoid 50 percent tariffs. On Friday, Treasury Secretary Scott Bessent said the Trump administration's various trade deals with other countries could be done by the September 1 Labor Day holiday, citing the country's 18 main trading partners. Earlier in the day, Commerce Secretary Lutnick said the U.S. and China have finalized a trade understanding, building on the agreement reached last month in Geneva. Lutnick also said the Trump administration expects to soon reach deals with ten major trading partners. It wasn’t all good news, however: On Friday President Trump announced he would end tariff talks with Canada after our northern neighbor said they are putting in place a digital service tax on American technology companies.

Fed Speak – Mixed Message on Timing: Last week Fed Chair Powell testified before both the House Financial Services Committee and the Senate Banking Committee. Investors were encouraged by Powell’s remarks that an interest-rate cut could arrive sooner than expected if inflation comes in lower than expected or the labor market weakens. He said the Fed is "well-positioned" to wait and assess incoming data, emphasizing the importance of balancing the central bank's dual mandates as inflation normalizes. Powell suggested that the focus is on September rather than the upcoming July meeting for a potential rate decision.

In other Fed news, Minneapolis Fed President Kashkari noted the need for more clarity on tariff impacts before policy adjustments, despite positive inflation data. New York Fed President Williams supported holding interest rates steady to analyze policy impacts on jobs and inflation. Boston Fed President Collins anticipates at least one interest-rate cut this year but deemed July too early. San Francisco Fed President Daly observed that tariffs may not cause a significant inflation, supporting a fall rate cut. Fed Governor Bowman advocated for a rate cut "as soon" as July, aligning with Fed Governor Waller, who also downplayed tariff-related inflation risks and suggested a possible July rate cut.

Economic Roundup: Initial jobless claims for the week ending June 21 fell to 236,000, below the 243,000 consensus estimate from Bloomberg. However, continuing claims rose to 1.974 million (from 1.937 million the prior week), the highest level since November 2021, indicating longer job searches. The U.S. Commerce Department reported a 0.5 percent contraction in first quarter gross domestic product (GDP), exceeding the 0.2 percent contraction forecasted by economists. The National Association of Realtors (NAR) reported a 0.8 percent rise in existing home sales in May, reaching an annual rate of 4.03 million, slightly above the 3.95 million consensus forecast. Year-over-year, home sales decreased 0.7 percent, while the supply of homes for sale rose 6.2 percent to 1.54 million units, the highest since June 2020. Lastly, the Conference Board’s consumer confidence index dropped from 98.4 in May to 93.0 in June, contrary to consensus expectations for a slight increase.

The Week Ahead: The focal point of this week’s data calendar will be the U.S. payroll report for June on Thursday. According to Bloomberg, economists expect nonfarm payrolls to expand by 120,000, while the unemployment rate is expected to rise to 4.3 percent from 4.2 percent in May. Ahead of the jobs data release, updates on the U.S. labor market will also come from the May JOLTS report on Tuesday and the ADP report on Wednesday. Other reports of interest include the June ISM indices released on Tuesday (manufacturing) and Wednesday (services). The Fed speaking calendar will be relatively light this week with Fed heads scheduled to make speeches. Amongst this group will be Fed Chair Powell who will participate in a panel discussion on Tuesday with the heads of the European Central Bank, Bank of England, Bank of Japan, and the Bank of Korea. The earnings calendar will be very light with just two members of the S&P 500 expected to release fiscal quarter results. Markets will be closed on Friday in observance of the July 4 holiday.

— 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 October 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 February 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.