U.S. jobs data and central bank decisions highlight the week

June 3rd, 2025

RECAPPING LAST WEEK

U.S. equity indices posted strong returns for the month of May, but gains in the shortened last week were held in check after more tariff uncertainty emerged. The S&P500, Nasdaq Composite, and Russell 2000 indices rose 2% or less for the week. Ten of eleven S&P500 sectors were positive, led by real estate and healthcare. Energy was the lone decliner, pressured by sliding crude oil prices as OPEC+ was said to be considering more production increases.

Gold futures slipped 1% while Bitcoin dropped 3%. U.S. Treasury yields eased as investors sorted through the latest barrage of tariff-related news. Late on Wednesday, a U.S. trade court ruling blocked most of the tariffs initiated this year, not including sector-specific levies. However, the following day a federal appeals court paused the lower court ruling to consider the government’s request for review. Meanwhile, the White House accused China of violating the recently reached agreement on tariffs, and Treasury Secretary Bessent said that trade talks between the countries were “a bit stalled.” The involvement of the courts along with tensions between the two largest global economies add new wrinkles to an already complex and seemingly fragile situation.

Economic data was generally positive last week with sentiment indicators improving. Consumer confidence jumped to 98.0 in May—a 12-point increase from the prior reading—while the consumer sentiment index edged up to 52.2 from 50.8, and inflation expectations eased slightly. The headline PCE price index fell to 2.1% YoY and the core measure slowed to 2.5%, in line with forecasts. The second estimate of Q1 GDP showed a slightly smaller contraction at -0.2%, while the U.S. goods trade deficit narrowed sharply in April as the boost from tariff front-running faded. Minutes from the last FOMC meeting revealed “difficult tradeoffs” faced by the committee if inflation and unemployment start to rise in tandem. Finally, chip giant Nvidia jumped more than 9% before pulling back, after posting first-quarter results that exceeded expectations despite challenges related to China export rules. Artificial intelligence continues to attract substantial investment, which should be seen as a tailwind to growth sectors of the markets. Overseas, Japan considered
trimming issuance of super-long bonds in response to the recent rise in yields. A weak auction on Wednesday raised concerns of dwindling demand from bond investors in the heavily indebted country.

Expectations for a Bank of Japan rate hike in July ramped up after two key core inflation readings accelerated. In Europe, Germany’s CPI held steady at 2.1% YoY in May, while consumer sentiment rose for a third straight month. European Central Bank President Lagarde said that erratic U.S. economic policies could present an opportunity for the euro to take on a larger global role but not without improvements in capital market structure and legal foundations.

THE WEEK AHEAD

As the calendar turns to June the focus shifts to the monthly U.S. jobs data along with central bank decisions in Canada and Europe. Jobless claims ticked up to 240,000 last week, and other U.S. employment indicators have been trending lower, so investors will be watching not only Friday’s non-farm payroll results for May but also any potential revisions for prior months.

ISM manufacturing and services PMIs will be released today and Wednesday, respectively. Fed Chair Powell is scheduled to speak at a conference in Washington today. The rest of the U.S. economic calendar includes factory orders, revised productivity figures, and a consumer credit update. The European Central Bank is expected to cut rates by 25 basis points at Thursday’s meeting with another reduction not being priced in until October. The euro has benefitted from the declining U.S. dollar and may stay elevated if the ECB signals that its rate-cutting cycle is nearing an end.

Consumer inflation for the Eurozone arrives on Tuesday. Meanwhile, the Bank of Canada is likely to hold rates at 2.75% with traders awaiting any forward guidance. OPEC+ was planning to meet this past Saturday to discuss a production increase in July that could mirror or exceed the 411,000 barrel a day hike in April. China’s Caixin PMI releases round out the international agenda.

(Schwab)

Definitions

Annualized Return: The rate at which an investment grows each year over the period to arrive at the final valuation.
Bear Market: A decline of at least 20% from the market’s high point to its low.
Beta: A measure of how an individual asset moves when the overall stock market increases or decreases.
Correlation: A measure of the extent to which two variables are related.
Dividend Yield: The dividend yield or dividend-price ratio of a share is the dividend per share, divided by the price per share. It is also a company’s total annual dividend
payments divided by its market capitalization, assuming the number of sharesis constant.
Developed Markets: A country that is most developed in terms of its economy and capital markets. The country must be high income, but this also includes openness
to foreign ownership, ease of capital movement, and efficiency of market institutions.
Emerging Markets: A country that has some characteristics of a developed market but does not fully meet its standards. This includes markets that may become
developed marketsin the future or were in the past.
GrowthFactor Stocks: Growth stocks are companies expected to grow sales and earnings at a fasterrate than the market average.
LargeCap Stocks: Shares of publicly traded corporationswith a market capitalization of $10 billion or more.
LTM: An acronymfor”Last Twelve Months”or the past one year.
NTM:An acronymfor”Next Twelve Months” or the next one year.
Price Return: The rate of return on an investment portfolio, where the return measure takes into account only the capital appreciation of the portfolio, not including
income generated in the form of interest or dividends.
Total Return: Return on a portfolio of investmentsincluding capital appreciation and income received on the portfolio.
Small Cap Stocks: Small-cap stocks are shares of companieswith a market capitalization of less than $2 billion.
Standard Deviation: In statistics, the standard deviation is a measure of the amount of variation or dispersion of a set of values. A low standard deviation indicates the
valuestend to be close to the historical average of the data set, while a high standarddeviationindicatesthe current value is outside of the historical average range.
Value Factor Stocks: Stocksthat are inexpensive relative to the broad market based on measures of fundamental value (e.g., price to earnings or price to book).

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