Today's Update 05-21-2025
Key Points and Metrics
Key Points and Metrics:
US Mortgage Rates and Applications:
US MBA 30-Year Mortgage Rate increased to 6.92% on May 21 (Previous: 6.86%).
US MBA Mortgage Applications decreased by 5.1% (Previous: increase of 1.1%).
Target Corporation (TGT) Q1 2026 Earnings:
Adjusted EPS: Reported at $1.30, missing the estimate of $1.66.
Net Sales: $23.85 billion.
Gross Margin: 28.2%.
Comparable Sales: Decreased by 3.8% (Estimate: decrease of 1.94%).
EBITDA: $2.29 billion (Estimate: $1.84 billion).
Full-Year Adjusted EPS Guidance: Revised to $7 to $9 from previous guidance of $8.80 to $9.80 (Estimate: $8.43).
UK Inflation Data:
UK CPI YoY: Increased to 3.5% (Forecast: 3.3%, Previous: 2.6%).
UK Core CPI YoY: Rose to 3.8% (Forecast: 3.6%, Previous: 3.4%).
UK CPI MoM: 1.2% (Forecast: 1.0%, Previous: 0.3%).
UK RPI MoM: 1.7% (Forecast: 1.4%, Previous: 0.3%).
German 10-Year Bund Auction:
Yield: Increased to 2.66% (Previous: 2.47%).
Bid-to-Cover Ratio: 2.4 (Previous: 1.4).
Japan Trade Data (April):
Exports YoY: Increased by 2.0% (Forecast: 2.5%, Previous: 4.0%).
Imports YoY: Decreased by 2.2% (Forecast: -4.2%, Previous: 1.8%).
Trade Balance: Deficit of ¥115.8 billion (Forecast: Surplus of ¥215.25 billion, Previous: Surplus of ¥559.4 billion).
Exports to China: Decreased by 0.6% YoY.
Exports to the US: Decreased by 1.8% YoY.
Exports to the EU: Decreased by 5.2% YoY.
Oil Market:
Crude Oil Prices: Rose by approximately 0.9% due to reports suggesting Israel may be preparing for a possible strike on Iran's nuclear facilities.
European Central Bank (ECB) Statements:
ECB's de Guindos:
Indicated that interest rates may need to come below the neutral rate (between 1.5% - 2%) to prevent inflation from falling under 2%.
Mentioned that the 2% price goal is expected to be reached sooner rather than later.
Noted that energy costs and the euro are pushing inflation down.
Expressed concerns over high equity valuations and credit spreads being out of sync with risk.
Commented on market complacency, warning it can change.
ECB's Centeno:
Stated that some one-off factors boosted Q1 GDP in the Eurozone.
US Legislative Developments:
US House Speaker Johnson:
Announced plans for a floor vote on the tax bill today.
Reached a $40,000 State and Local Tax (SALT) deduction cap agreement.
Representative Harris: Expressed that the tax bill "got worse overnight."
Representative Roy: Remains opposed to the tax bill.
Market Sentiment and Economic Outlook:
Stock Markets:
US stocks are expected to decline further amid concerns over rising bond yields and uncertainties surrounding US tax cuts.
European shares retreated, with S&P 500 futures down 0.7%.
Currency Strength:
Strongest Currencies: CHF, JPY, AUD, EUR, GBP, NZD, CAD.
Weakest Currency: USD.
US Dollar:
Weakened against major currencies.
Traders are cautious about taking on more risk.
Oil Prices:
Increased due to geopolitical tensions in the Middle East.
Bond Yields:
Yields on 30-year US Treasuries remained above 5%.
Japanese 30-year bonds underperformed, with yields up 6 basis points.
Other Notable Events:
Elon Musk is scheduled to attend a White House meeting with South African President Ramaphosa and President Trump.
Morgan Stanley made sector adjustments:
Downgraded US utilities sector to equal weight from overweight.
Upgraded US industrials sector to overweight.
China's Ministry of Commerce:
Expressed that US trade talks are an important step to bridge gaps but emphasized the need for multilateralism to resolve global trade turmoil.
German Economic Forecasts:
2025 GDP Growth cut to 0.0% from 0.4%.
Expected to grow by 1.0% in 2026.
Fiscal package offers opportunities to modernize infrastructure and return to higher growth.
Economic Outlook:
Economists poll shows US economy expected to grow 1.4% in 2025, 1.5% in 2026
41 economists surveyed believe Trump policies have hurt US economy
US CPI projected at 3.1% in 2025, 2.8% in 2026
White House advisor Hassett maintains 3% growth target, calling CBO's 1.8% forecast "conservative"
Today's Key Events:
EIA Crude Oil Inventories (10:30 ET)
US 20-Year Bond Auction (13:00 ET)
Fed's Barkin speech (12:15 ET)
Trump meeting with South African President (11:30 ET, 12:45 ET)
Final Thoughts
Markets are exhibiting heightened caution as multiple risk factors converge. The uncertainty surrounding the US tax bill is particularly significant as it represents a core element of the Trump administration's economic agenda. Meanwhile, the potential escalation in Middle East tensions could drive further volatility in energy markets. The higher-than-expected UK inflation data suggests central banks may need to maintain restrictive policies longer than markets anticipated. Investors should prepare for continued volatility as these political, geopolitical, and economic factors play out in the coming days.
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