Weekly Market Recap: Markets Rebound on Trade Hopes and AI Strength as Fed Holds Steady

Market Overview

U.S. equities roared back over the Memorial Day-shortened week, with the S&P 500 (+1.9%), Dow Jones (+1.7%), and NASDAQ (+2.0%) all finishing strong. Nvidia’s solid earnings reinforced the AI-driven growth narrative, while a delay in EU tariffs and a surprising consumer confidence rebound helped push major indexes higher.

Sector-wise, Real Estate (+2.7%), Technology (+2.4%), and Communication Services (+2.1%) led the pack, while Energy (-0.4%) lagged. Despite trade uncertainty, markets absorbed news that the U.S. Court of International Trade struck down most Trump-era tariffs — a decision that was quickly appealed, keeping duties intact for now.

Globally, European stocks posted modest gains, supported by rising consumer confidence and inflation expectations ahead of a widely expected ECB rate cut. In Asia, Japan’s market advanced on brief tariff optimism, while China and Taiwan slipped on renewed trade tension and weakening consumer sentiment.

In fixed income, U.S. Treasury yields slipped, with the 10-year falling ~10 basis points, as investors digested softer-than-expected GDP revisions and rising initial jobless claims. Commodities, meanwhile, saw a second straight weekly decline, with WTI crude falling amid renewed U.S.-China tensions and metals broadly slipping.

Federal Reserve Insights and Economic Roundup

Headline inflation cooled in April to 2.1% — likely the year’s low — but economists warn it may pick back up in the months ahead. Rising real incomes (up 0.7% MoM) are providing crucial support to households navigating today’s uncertain landscape.

The Federal Reserve remains firmly in “wait and see” mode. According to May’s FOMC minutes, the Fed is holding steady because the labor market is robust, wage growth isn’t adding inflationary pressure, and capital expenditures are merely paused, not collapsing, amid trade policy noise. The Fed is watching tariffs closely, as fluid policy shifts could introduce upside risks to inflation.

Importantly, the Fed likely won’t cut rates unless the labor market shows meaningful deterioration — keeping next week’s jobs report front and center for investors.

The Week Ahead

Key data releases to watch:

Monday: ISM Manufacturing (May), Construction Spending (Apr)

Tuesday: Factory Orders (Apr), JOLTS Job Report (Apr)

Wednesday: ADP Employment Change (May), ISM Services Index (May)

Thursday: Initial & Continuing Jobless Claims, Productivity & Unit Labor Costs (Q1 final)

Friday: Nonfarm Payrolls (May), Unemployment Rate (May), Average Hourly Earnings (May)

With the Fed closely eyeing jobs data, Friday’s payrolls report could be the pivotal moment for market sentiment — either reinforcing the current stance or triggering new rate expectations.