Weekly Recap:

by Michael P. Reinking, CFA & Eric Criscuolo

Published on 06/20/25

Markets ended last week a bit on edge as Israel and Iran exchanged missile attacks. It quickly became clear this was an escalation from the largely symbolic exchanges at the end of last year. Despite the heightened risk, outside of the move higher in oil, the overall reaction within financial markets was muted. The attacks continued over the weekend with targets even including energy infrastructure. However, that infrastructure was focused on domestic consumption. The worst-case scenarios were avoided for the time being. This coupled with some better than feared economic data in China helped global markets move modestly higher to start the week.

Geopolitical risk remains front and center and has driven some modest headline volatility largely in response to President Trump’s tone about the U.S. getting more directly involved. At this point the President has set a two-week deadline to make that decision and has still left the door open to diplomacy. This adds to a growing list of potential catalysts in July including the Big Beautiful Bill and the trade deadline. Speaking of, the G7 took place this week, where President Trump was expected to meet with multiple high level government officials, however, he left those meetings early to deal with the Middle East situation. We’ll need to see if this impacts the timing of those negotiations.

Outside of the Middle East the big catalyst this week was the FOMC rate decision. As widely expected, the Committee left rates unchanged. The market response on Wednesday tells you pretty much everything you need to know. The S&P 500 traded in a less than 1% range ending slightly lower and Treasury yields ended the day unchanged, just the way the Fed would like it. The overarching message from Fed Chair Powell was consistent with the recent communication - the economy continues to remain resilient, and as long as that is the case, he is comfortable with the current monetary policy stance while waiting to see the impact of tariffs on inflation, which he doesn’t think will be apparent for at least a few more months. If you want a deeper dive into the Fed meeting you can check out our Fed Recap.

Today was triple witch expiration and the quarterly index rebalance with the closing auction on the NYSE exceeding 2B shares. Hedging activity associated with options expiration may have helped to suppress volatility this week, so it will be interesting if we start to see an expansion of the recent tight range next week as these positions roll off. The S&P 500 didn’t veer too far from the 6k level throughout the week.  US indices ended the week mixed with some modest outperformance by small and mid-cap indices. 

Sector performance was also mixed. Energy continued to outperform but to a much lesser extent than last week ending up ~1%. Info tech was up a similar amount with semiconductors continuing to be some of the best performing stocks though they did pull back today after some more headlines related to China chip controls.

Financials bounced back after falling last week. The Senate passed the Genius Act this week a step in establishing a regulatory framework for stablecoins. Circle continued to surge after its recent IPO while this continued to weigh on the payment processors. This week JPMorgan also announced a partnership with Coinbase (+>25%) to create its new digital currency called JPMD.

On the downside healthcare was the big underperformer falling nearly 3% with pharma and biotech continuing to be under pressure after RFK Jr. removed all members of the CDC’s vaccine advisory committee last week. Biotech also got hit after a second death was associated with Sarepta’s Elevidys DMD gene therapy treatment. Comm services fell 2% with Alphabet accounting for much of the weakness. Telecom and cable stocks were lower while other media stocks traded well.  

Global Markets: Mostly lower across Europe and Asia but finished stronger on Friday on hopes of Middle East de-escalation.      

Commodities - Broadly higher on the Middle East escalation, with ebb and flow of potential US involvement adding to volatility.

The US Dollar Index was slightly lower for the week but off its worst levels after breaking below 98. The Dollar gained versus the yen and swiss franc, strengthening in five of the last six days but has continued to weaken versus the Euro, trading above $1.16 at one point. 

The Fed meeting was the big economic event this week but there were a few other secondary updates. Weekly jobless claims were inline with consensus and ticked down from a revised 250K last week, to 245K this week. Continuing claims were slightly above consensus but also ticked down from last week’s revised number.

May Retail sales saw the headline come in weaker than expected, but the important control group, which feeds into GDP, came in better than expected (0.4% vs. 0.3%) and above last month’s 0.1% decline. Motor vehicles (-3.5%), Building materials (-2.7%), and Food services (-0.9%) saw the greatest declines month/month. Miscellaneous stores (+2.9%), sporting/hobby (+1.3%) and furniture/furnishings (+1.2%) saw the biggest increases.

May Industrial Production fell 0.2%, missing consensus of +0.1%. However most durable consumer goods saw growth, including automotive, home electronics and appliances/furnishings, along with clothing. Energy saw a sharp decline (-3.2%). Capacity Utilization fell to 77.4%, down from last month and consensus of 77.7%.

We got two Fed survey updates this week. The Empire Manufacturing was below estimates driven by a decline in current conditions, primarily new orders and shipments. Employment improved while the prices paid fell. It was also notable that 6mo forward expectations jumped to 21.2 from -2. The Philly Fed Manufacturing Index was unchanged on the topline (-4) and slightly below consensus of -1. However, unlike Empire, the Philly Expectations (6 months from now) saw a significant drop, from 47.2 to 18.3, with New Orders falling from 49.7 to 22.1.

Like equity markets, the volatility in Treasury markets was muted with yields falling modestly across the curve.

Credit spreads were essentially unchanged again this week.

Once again all eyes will be on the Middle East this weekend. The key economic data will be the Global flash PMIs on Monday and PCE later in the week. Chair Powell will be testifying before Congress on Tuesday and Wednesday. Fed officials have already started coming out of the woodwork so we can try to triangulate where Committee members stand on the internal divide. Early cycle earnings start including FedEx, Nike and Micron (it feels like the earnings cycle never ends). Next Friday is also the Russell Reconstitution so expect another big closing auction. Have a great weekend! 

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