Last Week on Wall Street – May 17th, 2025

S&P 500: 5.27% DOW: 3.41% NASDAQ: 7.15% 10-YR Yield: 4.45%

What Happened?

This week, Wall Street experienced a notable upswing, driven by a temporary easing of trade tensions between the U.S. and China. The announcement of a 90-day tariff truce, which includes significant reductions in previously imposed duties, sparked a rally across major indices. The S&P 500, for instance, seeing its fifth consecutive gain and positioning it within 3% of its February record. Investors responded positively to the prospect of improved trade relations, although analysts caution that the underlying issues remain unresolved.

In addition to trade developments, the IPO market showed signs of revival. Companies like eToro successfully launched their public offerings, raising substantial capital and indicating renewed investor appetite for new listings. This resurgence suggests that, despite recent volatility, market participants are regaining confidence in the broader economic outlook.

While the week’s gains reflect a more optimistic sentiment, experts advise caution. The temporary nature of the tariff reductions means that uncertainties persist, and the potential for future disruptions remains. Nonetheless, the current momentum provides a hopeful sign that, with continued diplomatic efforts and economic resilience, markets may navigate through these challenges toward sustained growth.

April inflation report shows prices grew at slowest pace since 2021

April CPI rose 2.3% year-over-year down from March’s rate of 2.4%.
Consumer prices slowed at the slowest rate since February 2021.
Notable deflationary contributors came from gasoline prices dropping 0.1% and egg prices fell 12.7%.

The key takeaway – After months of persistent inflation, April finally offered markets a welcome pause. The Consumer Price Index rose at its slowest annual pace since early 2021, giving investors a fleeting sense that price pressures may be losing steam. But economists and market participants aren’t breaking out the champagne just yet, because the data doesn’t yet capture the looming inflationary effects of new trade policies.

The Trump administration and trading partners like China and the UK are deep in negotiations, with a 90-day grace period being temporarily put in place, widely seen as a tactical pause rather than a permanent pivot. The broader market understands: this delay only postpones the inevitable price increases tied to costlier imports, which could show up in future CPI prints.

This places the Federal Reserve in an increasingly precarious position. Chair Jerome Powell has made it clear that the Fed is watching for definitive signs of economic softening before considering rate cuts. But the longer interest rates stay elevated, the tighter financial conditions become, and that has real consequences for market liquidity. From corporate borrowing to consumer spending, high rates reduce the flow of capital throughout the system. Should tariffs further slow economic activity or strain the labor market, the Fed may be compelled to act sooner than anticipated, not just to temper inflation, but to keep liquidity from drying up in critical areas of the economy.

What’s in China-US trade deal? Tariff cuts and key details

The U.S. cuts liberation day tariffs on China from 145% to 30%.
China cuts tariffs on the U.S. from 125% to 10%.

The key takeaway – Recent signals of de-escalation in U.S.-China trade tensions have offered a welcome reprieve to financial markets. With both sides dialing back some tariffs, investors responded positively, helping major indices recover earlier losses and lifting sentiment across sectors. While details remain limited, the broad view is that this pause reduces immediate pressure on global supply chains and inflation expectations.

Analysts are cautiously optimistic, suggesting the move could support economic momentum in the short term. Some have even revised recession probabilities downward, citing improved trade dynamics and softer inflation prints. However, most agree the outlook depends on how durable these trade actions prove to be. For now, the easing of tensions offers a stabilizing force amid broader uncertainty.

March Existing-Home Sales

Existing-home sales fell 5.9% month-over-month to a seasonally adjusted rate of 4.02 million in March 2025.
Year-over-year, sales drew back 2.4%.

The key takeaway – The U.S. housing market continues to face headwinds as the spring 2025 season unfolds. Recent data indicates a 5.9% decline in existing-home sales in March, bringing the annualized rate to 4.02 million units. Despite a 2.7% year-over-year increase in the median home price to $403,700, affordability remains a significant concern for many buyers . Elevated mortgage rates, hovering around 6.75%, coupled with economic uncertainties, have contributed to cautious consumer behavior and a subdued market .

Inventory levels have risen, with a notable 31.1% year-over-year increase in listings by early May, reaching a six-year high . However, this surge in supply has not translated into increased sales, as potential buyers remain hesitant amid high borrowing costs and concerns over economic stability. In response, sellers in various markets, including Seattle, are offering concessions to attract buyers, reflecting a shift towards a more buyer-friendly environment.

Analysts suggest that while the current market conditions present challenges, they may also lay the groundwork for future stabilization. As mortgage rates potentially ease and economic conditions improve, affordability could enhance, leading to increased buyer activity. Moreover, the current inventory buildup may provide more options for buyers, potentially balancing the market dynamics in the latter half of the year.