U.S. stocks closed near unchanged on Friday but ended the month with significant gains despite new escalations in the U.S.-China tariff war. The market brushed off cooler-than-expected inflation data, focusing instead on renewed trade tensions. President Trump accused China of violating an earlier trade agreement.
“China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” he tweeted. The administration is reportedly planning to broaden restrictions on China’s tech sector, with officials drafting regulations to impose U.S. government licensing requirements on transactions with companies majority-owned by already-sanctioned firms. The Dow Jones Industrial Average added 0.13%, or 54.34 points, to close at 42,270.07.
The S&P 500 lost 0.01%, or 0.48 point, to finish at 5,911.69, and the Nasdaq Composite shed 0.32%, or 62.11 points, closing at 19,113.77. The benchmark 10-year Treasury yield slid to 4.4%. Earlier in the day, Treasury Secretary Bessent mentioned on Fox News that U.S.-China trade talks “are a bit stalled.” Investors had hoped for a substantive trade deal with China after earlier negotiations seemed promising.
In related news, a federal court halted Trump’s aggressive tariff plan, citing overreach. While the administration appealed, the tariffs are currently on hold as the case progresses. Considering alternative methods, the administration is contemplating using a provision of the Trade Act of 1974 to implement 15% tariffs for 150 days.
Analyst Chris Krueger at TD Cowen noted that given Trump’s public dissatisfaction with previous court rulings, there might be further tariff escalations soon.
market gains amid trade tensions
Despite some market weakness on the last trading day of May, the S&P 500 and Nasdaq recorded their best month since November 2023, and the Dow saw its biggest monthly gain since January.
The Federal Reserve’s preferred inflation measure, the PCE price index, rose 2.1% annually in April, slightly lower than the forecasted 2.2%. The core rate, excluding food and energy, rose 2.5%, again under expectations. Consumer spending slowed as predicted, but personal income rose 0.8% for the month, well above the anticipated 0.3%.
“The key figure is the increase in income, which was unusually strong,” said Robert Frick, corporate economist with Navy Federal Credit Union. “Spending follows income, so that points to the expansion continuing at a solid clip.”
The University of Michigan consumer survey remained flat from April at 52.2, the lowest since July 2022. James Smith, developed markets economist at Dutch bank ING, noted, “Consumer and business confidence has cratered,” but official spending and hiring numbers remain relatively stable.
In corporate news, Gap Inc. forecasted lower-than-expected second-quarter revenues, causing shares to plunge 20%. Costco’s quarterly results surpassed expectations, boosting shares by 3%.
Regeneron shares dropped 19% after its experimental lung condition drug failed a late-stage trial. Trump Media & Technology Group raised around $1.44 billion from stock sales and about $1 billion from convertible bonds to purchase Bitcoin. Shares of Trump Media rose about 2.5%, while Bitcoin was last down 1.01%, trading at $104,590.30.