Weekly Trader's Outlook
Stocks Consolidate, as Rising Yields, Tariff Concerns Spur Profit-Taking Pullback

The Week That Was
If you read last week's blog you might recall that my forecast for this week "Slightly Bearish," noting a high probability, in my view, of stocks finally encountering some healthy consolidation. At the time of this writing the S&P 500 is down ~2.5% on the week, so my forecast turned out to be accurate. To be honest though, there were several hurdles that markets had to overcome this week, which helped pave the way for a profit-taking pullback. Topping the list is rising longer-term Treasury yields, in response to a Moody's downgrade of U.S. debt, a spike in long-term Japanese bond yields, and a poorly received 20-year U.S. Treasury auction (more on this in the "Economic Data, Rates & the Fed" section below). The rise in long-term sovereign debt yields appears to be primarily tied to debt/deficits and fiscal sustainability. Rising Treasury yields suggest creditors, or those who buy Treasuries, are wanting a higher yield to help compensate for higher perceived risk to repayment. Another hurdle that hit markets this week was a Truth Social post from President Donald Trump that he is recommending a 50% tariff on the EU since negotiations are "going nowhere." Trump also said that Apple iPhones will be subject to a 25% tariff if they are not made in the U.S. Last week Trump said that he "had a little problem" with Apple's recent announcement to increase iPhone production in India rather than in the United States. Stocks opened lower by ~1% today following the news, and the VIX hit it highest level in two weeks (25.53) earlier in the trading session. One technical development to keep an eye on in the coming week is the S&P 500 index, which registered a classic "throwback" to its 200-day Simple Moving Average this morning and appears to be successfully finding bid support (more on this in the "Technical Take" section below).
Outlook for Next Week
At the time of this writing (2:20 p.m. ET), stocks are lower across the board, but near the highs of the session as investors position ahead of the 3-day Memorial Day weekend (DJI - 149, SPX - 22, COMP - 119, RUT - 4). Heading into next week, I think market performance will primarily be driven by three factors: 1) potential EU tariff increases and if so, subsequent EU reciprocal tariffs 2) Nvidia earnings/guidance on Wednesday and 3) Treasury yields. Those factors are not in order of importance, they are all potential market movers, and each is subject to a level of variance. Trump's recommendation to impose a 50% tariff on the EU was not an executive order, and while we don't know whether it is posturing or not, the EU said last week that they have readied countermeasures towards the U.S. if negotiations break down. Next, if you've been paying attention to recent AI-related earnings reports, or increased power demand because of AI, you would think that Nvidia is set to deliver strong quarterly results, but the AI darling is not immune to potential surprises. Lastly, the bond market has become increasingly important to stocks, especially since yields on the 30-year nearly notched a fresh cycle high yesterday morning. From a technical perspective, I'm encouraged by the SPX's bounce off its 200-day SMA this morning, but any negative trade developments could put this near-term support level in jeopardy. Therefore, while I acknowledge that next week holds a higher probability for a volatility inducing headline, my primary forecast is "Slightly Bullish." What could challenge my outlook? The most likely culprits in my view are a trade-related "tape bomb" or a push higher in longer-term Treasury yields.
Other Potential Market-Moving Catalysts:
Economic:
- Monday (5/26): no reports
- Tuesday (5/27): Consumer Confidence, Durable Goods, FHFA Housing Price Index, S&P Case-Shiller Home Price Index
- Wednesday (5/28): MBA Mortgage Applications Index
- Thursday (5/29): Continuing Claims, EIA Crude Oil Inventories, EIA Natural Gas Inventories, GDP – Second Estimate, Initial Claims, Pending Home Sales
- Friday (5/30): Advanced International Trade in Goods, Advanced Retail Inventories, Chicago PMI, PCE Prices, Personal Income, Personal Spending, University of Michigan Consumer Sentiment - Final
Earnings:
- Monday (5/26): no reports
- Tuesday (5/27): PDD Holdings Inc. (PDD), Autozone Inc. (AZO), Bank of Nova Scotia (BNS), Okta Inc. (OKTA) Sociedad Quimica y Minera de Chile SA (SQM), Box Inc. (BOX)
- Wednesday (5/28): Bank of Montreal (BMO), DICK's Sporting Goods (DKS), Kingsoft Cloud Holdings (KC), Abercrombie & Fitch Co. (ANF), Capri Holdings Ltd. (CPRI), Nvidia Corp. (NVDA), Salesforce Inc. (CRM), Synopsys Inc. (SNPS), Veeva Systems (VEEV), Agilent Technologies Inc. (A), HP Inc. (HPQ)
- Thursday (5/29): Royal Bank of Canada (RY), Canadian Imperial Bank of Commerce (CM), Burlington Stores Inc. (BURL), Best Buy Co. (BBY), Costco Wholesale Corp. (COST), Dell Technologies (DELL), Marvell Technologies Inc. (MRVL), Zscaler Inc. (ZS)
- Friday (5/30): Shoe Carnival Inc. (SCVL)
Economic Data, Rates & the Fed:
It was scant week for economic data, highlighted by yesterday's strong Purchasing Mangers' Index (PMI) data. Whether the strength is due to any "pull forward" demand from the potential impact of tariffs is unclear at this point. Elsewhere, Initial Jobless Claims appear to be relatively contained in a 220-235K range over recent history. Here's the breakdown from this week's reports:
- S&P US Manufacturing PMI: Rose to a three-month high of 52.3 from 50.2 in the prior month. This represents the strongest improvement in business conditions since June 2022.
- S&P US Services PMI: Rose to a two-month high of 52.3 from 50.8 in the prior month.
- New Home Sales: U.S. April New Home Sales came in at 743K versus the 693K expected. However, March new home sales were revised to 670K from 724K.
- Existing Home Sales: Declined by 0.5% from the prior month to a seasonally adjusted annual rate of 4.0M units.
- Initial Jobless Claims: Declined 2K from the prior week to 227K, and below the 230K expected. Continuing Claims increased 36K from last week.to 1.903M.
- The Atlanta Fed's GDPNow "nowcast" for Q2 GDP is unchanged from last week at +2.4%.
While the economic data might have been a yawner this week, the bond market was anything but, and for good reason. The week started off with yields gapping higher following a late Friday Moody's downgrade of the U.S. credit rating. Then, there was plenty of resistance with the "big, beautiful bill" making its way through congress, though the House was finally able to squeeze out a 215-214 victory late Wednesday. Across the pond, Japan saw a spike in 20-year JGB yields to the highest levels (2.555%) since 2000. Lastly, there was a poorly received 20-day U.S. Treasury auction on Wednesday. The net result of all these developments is a relatively larger rise in long-term Treasury yields due to rising debt/deficit concerns. In fact, yields on the 30-year Treasury came within three basis points of a fresh cycle high yesterday (5.15% vs. 5.18% back in October 20203), but have subsequently pulled back some. Compared to last Friday, two-year Treasury yields eased ~3 basis points (3.966% vs. 3.993%), 10-year yields moved up ~6 basis points (4.501% vs. 4.441%), while 30-year yields advanced ~13 basis points (5.034% vs. 4.903%).
Expectations around potential rate cuts from the Federal Reserve continued to ease this week. Per Bloomberg, expectations for a 25-basis-point cut at the June Federal Open Market Committee (FOMC) meeting are down to 2% from 5% and total 2025 rate cuts are down to 1.96 from 2.05 (both on a week-over-week basis).
Technical Take
S&P 500 Index (SPX - 40 to 5,802)
Following the S&P 500's (SPX) 20% rally off the April 7th lows, the index finally encountered a week of digestion, or consolidation in technical terms. This week's 2.5% pullback in the SPX has brought the index right back to its 200-day Simple Moving Average, where the index is testing this long-term moving average as potential support, and so far, so good. In technical terms, this type of a re-test of previously cleared resistance (meaning the 200-day SMA in this case) is called a "throwback". Assuming the index remains above the 200-day SMA early next week, the pullback would be classified as healthy consolidation, and the technical set-up is bullish.
Intermediate-term technical translation: bullish

Source: ThinkorSwim trading platform
Past performance is no guarantee of future results.
Dow Jones Industrial Average Index ($DJI - 229 to 41,629)
Last week I noted that the Dow Jones Industrial Average (DJI) was in a more ominous technical state and placed in the "show me" camp in regarding transcending resistance at the 200-day SMA. Unfortunately for the bulls, the $DJI once again appears to have delivered another technical "head fake" to traders. Back in late March the $DJI pushed above the 200-day SMA, only to roll back over and drop below it several days later, and it looks like it happened again this week. Fool me once, shame on you, fool me twice, shame on me. The technical set-up is slightly bearish until proven otherwise.
Near-term technical translation: cautious/slightly bearish

Source: ThinkorSwim trading platform
Past performance is no guarantee of future results.
Cryptocurrency News:
Renewed political momentum occurred in a key cryptocurrency bill this week. On Monday the bill, known as the GENIUS Act, passed a key procedural vote 66-32 in the Senate, paving the way for formal debate, potential amendments and a full floor vote. The bill is expected to be voted on after Congress gets back from the Memorial Day recess. The GENIUS Act is the first major piece of crypto legislation, designed to create a regulatory framework for stablecoins.
Market Breadth:
The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, stocks pulled back this week and market breadth contracted as a result. On a week-over-week basis, the SPX (white line) breadth dropped to 49.40% from 55.40%, the CCMP (blue line) moved down to 33.10% from 35.31%, and the the RTY (red line) slid to 29.92% versus 37.05%.

Source: Bloomberg L.P.
Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.
This Week's Notable 52-week Highs (20 today): Automatic Data Processing Inc. (ADP - $2.38 to $319.26), British American Tobacco Industries (BTI + $0.37 to $44.97), Dycom Industries Inc. (DY + $2.11 to $226.32), GE Vernova Inc. (GEV + $4.92 to $463.74), Netflix Inc. (NFLX + $0.03 to $1,188.00), Zscaler Inc. (ZS + $1.65 to $254.46)
This Week's Notable 52-week Lows (69 today): Alexandria Real Estate Equities (ARE - $0.56 to $68.05), Arbor Realty Trust (ABR + $0.07 to $8.99), Century Communities Inc. (CCS + $0.02 to $52.05), Helmerich & Payne (HP - $0.03 to $15.58), Nabors Industries (NBR - $0.47 to $25.03), Walker & Dunlop (WD - $0.57 to $66.23)