Stocks Stage a (Sign of) Relief Rally

Performance for Week Ending 4.25.2025:

The Dow Jones Industrial Average (Dow) added 2.5 percent, the Standard & Poor’s 500 Index (S&P 500) gained 4.6 percent, and the Nasdaq Composite Index (Nasdaq) finished up 6.7 percent. Sector breadth was positive, with ten of the eleven 11 S&P sector groups closing higher. The technology sector (+7.9 percent) led the advance, followed by consumer discretionary (+7.4 percent), and communication services (+6.4 percent).

*See below for Index Definitions

MARKET OBSERVATIONS: 4.21.2025  – 4.25.2025

The S&P 500 finished the week higher driven by hints of de-escalating U.S.-China trade tensions, President Donald Trump’s backtracking on threats to fire Fed Chairman Jay Powell, and a batch of upbeat corporate earnings reports. After National Economic Council Director Kevin Hassett suggested that President Trump was looking at ways to get rid of Powell, Trump issued a statement saying that he had no intention of firing Powell, despite his frustration with the central bank’s slow pace in cutting interest rates. Meanwhile, Trump seemed to soften has stance toward China, saying he plans to be “very nice” in any trade talks and that tariffs will drop if the two countries can reach a deal. Elsewhere, Treasury Secretary Scott Bessent told a closed-door investor summit that the tariff standoff with China is unsustainable and that he expects the situation to de-escalate.

Q1 Earnings: Through Friday, 178 members of the S&P 500 have released fiscal quarter results with just under 75 percent beating expectations. Aggregate earnings for this group are up 17.6 percent, well ahead of the 9.6 percent projected growth rate for the overall quarter. On the sector level, Communication Services and Materials companies are posting the biggest upside earnings surprises, while the strongest growth rates are in the Healthcare (+75.6 percent) and Communication Services (+27.8 percent). Earnings season will remain in high gear this week with 174 members of the S&P scheduled to report.

Fed Speak: Fed Governor Chris Waller said firms may begin laying off more workers if aggressive tariff levels are reinstated by the Trump administration, and he'd support rate cuts if there's a significant rise in unemployment. "I would expect more rate cuts, and sooner, once I started seeing some serious deterioration in the labor market," Waller said. Cleveland Fed President Beth Hammack ruled out a May interest-rate cut but said the central bank could move as early as June if it has clear evidence of the economy's direction. Richmond Fed President Tom Barkin said the US economy remained in good shape, but that trouble loomed in the outlook for business investment and consumer spending. Companies "are not—for the most part—firing people, but they are defensive, and that includes things like hiring freezes or postponing investments or delaying, deferring," Barkin said. Minneapolis Fed President Neel Kashkari said it's the central bank's job to make sure tariffs don't spur an ongoing inflation problem, echoing recent comments by Fed Chair Jerome Powell. "We just don't know right now with confidence: Is this a one-time effect on inflation, or is it something longer term?" Kashkari said, adding "Our job with the Fed is to make sure it is not something longer term."

Beige Book Report: The Fed's latest Beige Book, which provides anecdotal information collected by the Fed’s 12 reserve banks through April 14, said the economic outlook "worsened considerably," driven by concerns about the impact of tariffs just as inflation picked up pace ahead of an expected rise in input costs for businesses. The economic outlook in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose. The rising economic uncertainty is also beginning to filter through to the labor market, with several districts reporting that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions. While employment was little to slightly changed in most districts since the prior report, consumer-facing firms had slowing hiring relative to business-to-business firms. On the inflation front, prices increased across districts, with most districts bracing for further prices pressures driven by elevated input cost growth resulting from tariffs.

Economic Roundup: New orders for U.S. durable goods jumped 9.2 percent in March, well above expectations for a 2 percent increase. Excluding a 27 percent surge in transportation orders, new orders were little changed from the prior month. On the labor front, initial jobless claims rose to 222,000 in the week ended April 19 from an upwardly revised 216,000 in the previous week. The four-week moving average—which helps smooth week-to-week volatility—fell by 750 to 220,250. In terms of the housing market, the pace of existing home sales fell to a 4.02 million seasonally adjusted annual rate in March from 4.27 million in February. The monthly decline was the largest since November 2022. Total sales slid 2.4 percent from a year ago. Meanwhile, sales of new homes jumped last month on a welcome dip in mortgage rates and ongoing incentives to kick off the crucial spring selling season. Purchases of new single-family homes increased 7.4 percent in March to an annualized rate of 724,000, mostly driven by a surge in the South. Lastly, business activity expanded at the slowest pace since 2023, while output expectations deteriorated and price pressures mounted as tariffs created headaches for companies. The S&P Global flash April composite index of output at manufacturers and services providers dropped 2.3 points to 51.2. Figures above 50 indicate expansion.

The Week Ahead: It will be a jam-packed week of data releases with the April jobs report (Friday), ISM manufacturing index (Thursday) and core PCE for March (Wednesday) being the focal points. According to Bloomberg, nonfarm payrolls are forecast to rise by 133,000 in April, down from 228,000 in March. The unemployment rate is expected to come in at 4.2 percent, unchanged from March. Other economic reports of interest include the preliminary Q1 GDP reading, the employment cost index, ADP’s report of private payrolls, the March JOLTS data and the Conference Board’s consumer confidence indicator. It will be a busy week on the earnings front with 174 members of the S&P 500 expected to release results, including tech-bellwethers Microsoft and Meta on Wednesday and Apple and Amazon on Thursday. It will be a quiet week for Fedspeak due to the black out period ahead of the FOMC meeting on May 7 and 8. On the political front, Wednesday will mark President Trump’s first 100 days in office.

— 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.