Weekly Market Recap: Markets Stumble on Trade Tensions and Debt Worries as Investors Brace for Big Data Week

Market Overview

Markets wrapped up the week on a sour note, marking the longest losing streak since April. The S&P 500 fell -2.6%, the Dow slipped -2.4%, and the Nasdaq dropped -2.5%. Investor sentiment faltered under the weight of stalled U.S.-EU trade talks, renewed tariff threats, and concerns over swelling federal deficits tied to President Trump’s tax bill negotiations. Energy led sector declines, down -4.1%, followed by tech (-3.4%) and real estate (-3.3%), while consumer staples proved most resilient, down just -0.4%.

Internationally, European markets gave up earlier gains as ECB rate-cut bets faded, while in Asia, Japan saw losses trimmed by stronger inflation data, even as South Korea led regional declines.

Fixed income markets were rattled by disappointing 20-year U.S. and Japanese bond auctions, pushing Treasury yields higher. Commodities rallied on the back of metals strength, while crude oil slumped amid rising U.S. inventories and tempered demand signals. The U.S. dollar weakened broadly after four straight weeks of gains, pressured by fiscal concerns and sluggish trade progress.

Federal Reserve Insights and Economic Roundup

The Fed stayed firmly in “wait-and-see” mode as last week’s economic data painted a mixed picture. Unemployment claims ticked slightly lower, signaling ongoing labor market resilience, while the May PMI reading hinted at improving growth despite tariff headwinds. Thursday’s House passage of Trump’s reconciliation tax bill added fresh fiscal questions, with markets weighing whether trade-related growth hits could undercut its stimulus potential.

Across the Atlantic, central bankers’ comments and rising yields kept rate-cut hopes in check, while in Asia, Japan’s stronger-than-expected inflation print raised expectations for eventual policy adjustments.

The Week Ahead

With markets closed Monday for Memorial Day, focus shifts to a packed economic calendar:

• Tuesday brings April’s durable goods orders and home price data.
• Wednesday features mortgage applications and May’s FOMC meeting minutes.
• Thursday’s spotlight falls on Q1 GDP (second reading) and jobless claims.
• Friday wraps with key reports on personal income, spending, April PCE inflation, and May’s consumer sentiment.

Markets will closely watch whether signs of resilience hold or cracks start to widen under the pressure of rising tariffs, sticky inflation, and weakening global trade.