Breadth Improves While Trade Negotiations Thaw

More positive news on tariffs and a strong jobs report helped fuel equities last week.

Tariffs and inflation remain at opposite ends of the spectrum for now. The PCE Price Index, the preferred measure of inflation by the Fed, declined last month for the 2nd time in four months and remains below the historical average. Pending trade deals have been floated by the White House and China has begun offering olive branches to the U.S. According to Bloomberg, China has quietly exempted $40 billion worth of U.S. imports from tariffs. Friday's strong jobs report moved the needle for future rate cuts, as four cuts in 2025 were forecasted by the futures market. Now, only 3 cuts are forecast.

Conflicting data on economic releases last week probably left some investors scratching their heads.

First quarter GDP came in slightly worse than expected at -0.3%. The largest contributor to the negative number was Net Exports. This was due to companies front-running expected tariffs and importing goods at cheaper prices before tariffs kick in. In addition, Initial Claims moved higher this week by almost 20,000. However, New York saw a doubling of claims for that state due to the New York public schools. During the spring recess, closures often lead to temporary layoffs of non-teaching staff, which inflates the claims. Oil continues to track with slowing freight, especially from China. It's likely the worst is over in equity markets, for now. Yet, there's still likely to be more choppy trading ahead with the release of each tariff-related headline.

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