Closing Recap 

U.S. stocks finished mixed after a choppy session, with the Nasdaq edging higher while the Dow and S&P 500 slipped, as markets digested weak economic data and ongoing policy uncertainty; gold surged, the dollar and Treasury yields tumbled. 

Key Takeaways 

• Mixed, Choppy Session: Major indices saw divergent performance. Nasdaq gained on strength in select mega-caps, while broader market (S&P, Dow) ended slightly lower.
• Weak Economic Data Weighs: ADP employment change came in much weaker than expected, and ISM Services PMI unexpectedly dipped into contraction, fueling growth concerns.
• Tariff Backdrop Persists: Trump’s comments on President Xi and new steel/aluminum tariffs taking effect kept trade policy in focus. CBO revised cost of tax bill lower.
• Gold Surges on Weak Data/Dollar: Gold prices climbed as weak U.S. economic data and a falling dollar boosted safe-haven and inflation-hedge appeal.
• Oil Slips After Inventory Data: Crude prices reversed early gains to finish lower despite a larger-than-expected U.S. inventory draw.
• Yields & Dollar Plunge: Treasury yields fell sharply across the curve, and the U.S. dollar index dropped significantly, reacting to the soft economic reports.
• S&P 500 Rebalancing Speculation: Barron’s noted potential additions to the S&P 500 index later this month. 

Market Overview 

U.S. equity markets experienced a day of consolidation and divergent performance, as investors grappled with a fresh round of weak economic data against the backdrop of an impressive multi-week rally. While the tech-heavy Nasdaq managed to eke out further gains, driven by continued strength in select mega-cap names that have been the market’s stalwarts, the broader S&P 500 and Dow Jones Industrial Average finished slightly in the red. The market continues its “wall of worry” climb, with the S&P 500 still within striking distance of its all-time highs despite a litany of concerns including tariff uncertainty, rising federal debt, a cautious Federal Reserve, and now, clearer signs of weakening U.S. economic activity. 

Index	Up/Down	% Change	Last
DJ Industrials	-91.9	-0.0022	42427
S&P 500	0.44	0.0001	5970
Nasdaq	61.53	0.0032	19460
Russell 2000	-4.5	-0.0021	2098

Yesterday’s economic reports were a key focus. The ADP private employment change for May came in significantly below expectations, marking the weakest reading since March 2023. Compounding the concern, the ISM Non-Manufacturing (Services) PMI unexpectedly dipped below the 50 contraction threshold for the first time since June 2024, with new orders notably weakening. This data, arriving ahead of Friday’s official Nonfarm Payrolls report, painted a picture of a slowing economy. Survey responses within the ISM report highlighted that uncertain tariff policies are making business planning difficult. 

On the trade front, President Trump’s overnight comments on Truth Social about Chinese President Xi being “VERY TOUGH” to deal with, alongside new tariffs on steel and aluminum imports taking effect today, served as reminders of ongoing trade friction. However, these were somewhat offset by EU and Chinese officials agreeing to clarify the rare earth situation. In Washington, concerns about the rising national debt resurfaced as the CBO released a revised (though still substantial at $2.4 trillion) estimate of the cost of President Trump’s recently House-passed tax bill.

Economic Data

Economic data yesterday largely disappointed, pointing to a slowdown in both labor market gains and services sector activity:

• ADP Employment Change (May): Reported +37K, significantly below the +110K consensus and down from a revised +62K prior. Weakest since March 2023. Services +36K, Goods -2K. 
• ISM Non-Manufacturing PMI (May): Fell to 49.9 (1st contraction since June 2024), missing the 52.0 consensus and down from 51.6 in April. Business Activity 50.0 (vs. 53.7 prior). Prices Paid 68.7 (vs. 65.1 prior). New Orders 46.4 (vs. 52.3 prior). Employment 50.7 (vs. 49.0 prior). 
• S&P Global US Services/Composite PMI (May Final): Composite revised higher to 53.0 (from 52.1 flash). Services PMI revised higher to 53.7 (from 52.3 flash). 
• Eurozone HICP Inflation (May Flash): Fell to 1.9% y/y, below the ECB’s 2% target, potentially paving the way for further rate cuts. 

Commodities, Currencies, and Treasuries 

Gold prices surged again, with August futures climbing $22.10 (+0.65%) to settle at $3,399.20 per ounce, nearing recent record highs. The rally was driven by significant U.S. dollar weakness, safe-haven demand stemming from weak economic data and ongoing policy uncertainty, and its appeal as an inflation hedge. Crude oil prices reversed early gains to finish lower, with WTI down $0.56 (-0.88%) at $62.85/bbl. While weekly EIA data showed a larger-than-expected crude inventory draw (-4.3M barrels), prices ultimately succumbed to broader economic growth concerns fueled by the soft ADP and ISM reports. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-0.56	USD/bbl	62.85
Brent	-0.77	USD/bbl	64.86
Gold	22.1	USD/oz	3399.2
EUR/USD	0.0048	USD	1.1418
USD/JPY	-1.18	JPY	142.82
10-Year Note	-0.095	%	0.04365

The U.S. dollar index (DXY) fell sharply by over -0.4% to 98.75 as the Euro climbed back above $1.14, reacting to the weak U.S. data which increased bets on potential Fed easing later in the year. Treasury yields tumbled across the curve, with the 10-year yield falling as much as 11 basis points to around 4.35%. This marked the biggest one-day decline for the 10-year yield since mid-April, driven by the disappointing economic reports.

Looking Ahead 

The market will continue to digest today’s weak economic data and assess its implications for Federal Reserve policy, particularly ahead of Friday’s official Nonfarm Payrolls report. While trade headlines have been less dominant in the past couple of sessions, any new developments regarding tariffs or trade negotiations remain a key potential catalyst. Q1 earnings season is winding down, but any remaining reports and corporate guidance will be scrutinized. The focus also remains on Washington regarding the progress of the tax bill through the Senate.