US stock markets closed the week on a positive note, with major indexes posting solid gains amid a cooling of US-China trade tensions. Despite some concerns over rising consumer prices and a stalled tax bill, investors showed renewed confidence in growth assets.
On Friday, the S&P 500 climbed nearly 0.7%, marking its fifth consecutive day of gains. The Dow Jones Industrial Average followed with an 0.8% rise, while the tech-heavy Nasdaq Composite increased by 0.5%. The Nasdaq led weekly performance, rallying approximately 7% and outperforming other benchmarks as technology stocks regained momentum.
This strong finish comes after a dramatic start to the week, sparked by the unexpected rollback of some US-China tariffs. The move helped erase the S&P 500’s losses for 2025, pushing it into positive territory for the year and signaling a return to market stability. Investors eagerly resumed risk-taking, though caution lingers following Walmart’s warning about potential price hikes driven by ongoing tariffs.
Consumer Confidence Dips Amid Inflation Fears
Despite the rally, consumer sentiment took a hit in May. According to the University of Michigan’s latest survey, the consumer confidence index fell to 50.8—its second-lowest reading ever—down from 52.2 in April. Inflation expectations over the next year surged to 7.8%, the highest level since 1981. This shift reflects growing public concern about the cost of living, which could impact future spending and market dynamics.
Trade Policy Watch: Tariffs and Negotiations
Markets remain focused on trade developments as President Trump prepares to announce new tariff rates for US trading partners in the coming weeks. During a recent address, the president noted the challenge of negotiating deals with multiple countries simultaneously due to limited resources. His administration plans to send formal letters to countries outlining the tariff rates they will face when exporting to the US.
While the 90-day US-China tariff truce helped calm markets temporarily, analysts suggest tariffs may return unless a longer-term agreement is reached. Negotiations are ongoing, with talks continuing in South Korea, but many expect tariffs to remain elevated in the short term.
Looking Ahead
Investors will be watching closely for progress on trade agreements and additional government policies, including tax and spending legislation, which recently hit a roadblock in Congress. Meanwhile, inflation trends and consumer confidence will play key roles in shaping market sentiment moving forward.
If you’re invested in the stock market or tracking economic trends, staying informed about trade policies and consumer behavior is essential. These factors could impact everything from corporate earnings to your portfolio’s performance in the months ahead.