Today's Update 05-16-2025
Key Points and Metrics
Key Points and Metrics:
Market Overview:
S&P 500 Performance:
US futures gained, with the S&P 500 on track for one of its best weeks this year, closing up 4.5% for the week on Thursday.
Easing trade tensions between the US and China boosted market sentiment.
US Treasury Yields:
The 10-year Treasury yield declined as traders increased bets on Federal Reserve rate cuts.
Economic Indicators:
University of Michigan Consumer Sentiment (May Preliminary):
Consumer Sentiment Index: Fell to 50.8 (Forecast: 53.4, Previous: 52.2).
Current Conditions Index: Decreased to 57.6 (Forecast: 59.9, Previous: 59.8).
Expectations Index: Dropped to 46.5 (Forecast: 48.6, Previous: 47.3).
1-Year Inflation Expectations: Rose to 7.3% (Forecast: 6.5%, Previous: 6.5%).
5-Year Inflation Expectations: Increased to 4.6% (Forecast: 4.4%, Previous: 4.4%).
US Housing Data (April 2025):
Housing Starts:
Actual: 1.361 million units (Forecast: 1.364 million, Previous: 1.324 million).
Month-over-Month Change: +1.6% (Forecast: +3%, Previous: -11.4%).
Building Permits:
Actual: 1.412 million units (Forecast: 1.45 million, Previous: 1.467 million).
Month-over-Month Change: -4.7% (Forecast: -1.2%, Previous: +0.5%).
US Import and Export Prices (April 2025):
Import Prices Month-over-Month: +0.1% (Forecast: -0.3%, Previous: -0.1%).
Export Prices Month-over-Month: +0.1% (Forecast: -0.4%, Previous: 0.0%).
Central Bank Rates:
Effective Federal Funds Rate (EFFR):
4.33% on May 15th (unchanged from May 14th).
Secured Overnight Financing Rate (SOFR):
Increased to 4.31% on May 15th from 4.29% on May 14th.
International Trade:
Eurozone Trade Balance:
Actual (Adjusted): Surplus of €27.9 billion (Previous: €21 billion).
Non-Seasonally Adjusted: Surplus of €36.8 billion (Previous: €24.0 billion).
Italian Trade Balance:
International Trade Balance: Surplus of €3.657 billion (Previous: €4.466 billion).
Trade Balance with EU: Deficit of €2.453 billion (Previous: Deficit of €0.361 billion).
Currency Strength (as of 03:02 May 16):
Strongest Currencies: NZD, JPY, AUD, EUR, CHF, GBP, CAD.
Weakest Currency: USD.
Central Bank Statements:
European Central Bank (ECB):
ECB's Villeroy:
Indicated we are currently in a trade war situation, not a currency war.
ECB's Kazaks:
Mentioned that the 2% inflation target could be reached this year if the baseline holds.
Stated that the ECB is close to the terminal rate if the economic baseline remains stable.
Bank of Japan (BOJ):
BOJ Board Member Nakamura:
Expressed high uncertainty regarding the overseas economic outlook due to trade policies.
Emphasized the need for a cautious monetary policy approach.
Suggested maintaining current monetary policy for now.
Geopolitical Events:
US-China Trade Relations:
De-escalation in trade tensions has improved market confidence.
Traders are optimistic about potential Federal Reserve interventions to avoid a recession.
Russia-Ukraine Talks:
Negotiations took place in Istanbul with both delegations present.
Reports indicate Russia made demands regarding control over certain Ukrainian regions.
Discussions included ceasefire terms and prisoner of war exchanges.
US Political Developments:
President Trump is scheduled to attend a bill signing ceremony on Monday at 3 PM ET.
US officials are engaging in talks with UK, France, and Germany regarding Ukraine and Iran.
Economic Forecasts and Revisions:
Barclays Bank:
Updated forecasts, no longer expecting a US recession in the second half of 2025.
Raised growth forecasts for both the US and the Eurozone, anticipating flat GDP growth in the Euro Area for 2025 (revised from a previous forecast of -0.2%).
Other Notable Data:
Italian Inflation Data (April 2025):
Consumer Price Index (CPI) Year-over-Year Final: +1.9% (Forecast: 2%, Previous: 2%).
CPI Month-over-Month Final: +0.1% (Forecast: +0.2%, Previous: +0.2%).
Hong Kong GDP (Q1 2025 Final):
Quarter-over-Quarter: +1.9% (Forecast: +2%, Previous: +2%).
Year-over-Year: +3.1% (Forecast: +3.1%, Previous: +3.1%).
Geopolitical Developments:
Russia-Ukraine: Talks underway in Istanbul; Russia reportedly demanding control over 5 Ukrainian regions
Trump-Putin: Trump indicates plans to meet with Putin "as soon as possible"
Iran: Trump suggests "something bad is gonna happen" if Iran doesn't move on negotiations
Economic Outlook:
Barclays: No longer expects US recession in second half of 2025, raises growth forecasts
Japan: Economy shrank for first time in a year, showing vulnerability before Trump tariffs
BOJ: Nakamura warns against hurrying to raise benchmark interest rate
Final Thoughts
The markets are showing remarkable resilience despite mixed economic signals. Consumer sentiment is deteriorating while inflation expectations are rising, creating a challenging environment for the Federal Reserve. Nevertheless, investors appear focused on the positive developments in US-China trade relations, pushing the S&P 500 toward one of its strongest weekly performances of the year. The geopolitical landscape remains fluid, with significant developments in Russia-Ukraine negotiations and potential US-Iran tensions that could impact markets in the coming weeks. Traders should monitor these developments closely while maintaining a balanced approach to risk management in this evolving market environment.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own research and consider your financial situation before making investment decisions.
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Harry