Stock Market Update

[BRIEFING.COM] Today was a fluid day in terms of major news items. We'll synthesize them in a bullet-point format while pointing out that the stock market acted well in the morning session and poorly in the afternoon session.

The S&P 500 climbed as high as 5,999.70 but just couldn't make it over the 6,000 threshold and was eventually driven as low as 5,921.20, with stocks like Tesla (TSLA 284.68, -47.37, -14.3%), Costco (COST 1010.81, -40.88, -3.9%), Brown-Forman (BF.B 27.25, -5.95, -17.9%), and Palantir Technologies (PLTR 119.91, -10.10, -7.8%) in the driver's seat.

Here is a glimpse of what unfolded today:

• President Trump and President Xi had a phone call and agreed to have their respective teams meet again soon. This news hit early, and market participants seemed to like the idea that the tone of the call sounded more conciliatory than combative.
• Elon Musk decried the one big, beautiful bill on social media and urged lawmakers to "kill the bill," which ultimately drew the ire of President Trump, who expressed his disappointment in Elon Musk and suggested in his own social media post that terminating Elon's government subsidies and contracts would be the easiest way to save billions and billions of dollars in the budget.
• The European Central Bank voted to cut its key interest rates by 25 basis points. While that news was expected, it did not weigh on the euro, which was up 0.2% against the dollar.
• Q1 productivity decreased 1.5% (Briefing.com consensus -0.8%) versus the preliminary report of a 0.8% decrease. Unit labor costs, meanwhile, were revised up to 6.6% (Briefing.com consensus 5.7%) from the preliminary reading of 5.7%.
• Initial jobless claims for the week ending May 31 increased by 8,000 to 247,000 (Briefing.com consensus: 235,000). Continuing jobless claims for the week ending May 24 decreased by 3,000 to 1.904 million; however, the four-week moving average of 1,895,250 is the highest level since November 27, 2021.
• The trade deficit plunged in April to $61.6 billion (Briefing.com consensus: -$117.2 billion) from an upwardly revised deficit of $138.3 billion (from -$140.5 billion) in March. Exports were $8.3 billion more than March exports, but imports were $68.4 billion less than March imports.
• Circle Internet Group (CRCL 83.23, +52.23, +168.5%) had a wildly successful debut. After pricing its IPO at $31.00 per share, the global fintech specializing in stablecoins traded as high as $103.75 before closing the session at 83.23.

Briefly, there was some good and some bad in today's newsflow, so it was rather fitting that breadth figures reflected a mixed disposition. Advancers and decliners were about even at the NYSE, while decliners led advancers by a 13-to-9 margin at the Nasdaq.

Tesla was the biggest drag on the underperforming Nasdaq and fellow growth stocks, which underperformed value stocks today. Overall, buying interest was subdued, as the totality of today's news wasn't enough to maintain the market's bullish momentum in front of tomorrow's Employment Situation Report.

There was only one sector that eked out a gain. That was the communication services sector (+0.06%). The consumer discretionary sector (-2.5%), hurt by Tesla, was the worst-performing sector, followed by consumer staples (-1.2%), which felt the pressure of losses in Costco after a report showing a moderation in same-store sales for May and losses in Brown-Forman, which disappointed with its earnings results and FY26 outlook.

The remaining sectors logged losses between 0.1% and 0.6%.

• S&P 500: +1.0% YTD
• Nasdaq: -0.1% YTD
• DJIA -0.5% YTD
• S&P 400: -3.2% YTD
• Russell 2000: -6.0% YTD

Reviewing today's economic data:

• Q1 productivity decreased 1.5% (Briefing.com consensus -0.8%) versus the preliminary report of a 0.8% decrease. Unit labor costs, meanwhile, were revised up to 6.6% (Briefing.com consensus 5.7%) from the preliminary reading of 5.7%.
  • Briefing.com Analyst Insight: The combination of declining productivity and the big jump in unit labor costs has stagflation undertones that will complicate the Fed's assessment of the overall economic picture and what to do with its policy rate.
• Initial jobless claims for the week ending May 31 increased by 8,000 to 247,000. Continuing jobless claims for the week ending May 24 decreased by 3,000 to 1.904 million; however, the four-week moving average of 1,895,250 is the highest level since November 27, 2021.
  • Briefing.com Analyst Insight: These data point to some softening in the labor market but altogether don't ring any loud alarm bells for the economic outlook. Yes, initial jobless claims -- a leading indicator -- have risen, but they remain well below levels associated with a recession. It won't be until the initial claims numbers start to exceed 300,000 on a regular basis that alarms will sound with respect to the labor market and the economy's growth trajectory.
• One thing that became crystal clear this morning is that the trade deficit plunged in April to $61.6 billion (Briefing.com consensus -$117.2 billion) from an upwardly revised deficit of $138.3 billion (from -$140.5 billion) in March. Exports were $8.3 billion more than March exports, but imports were $68.4 billion less than March imports.
  • Briefing.com Analyst Insight: Bear in mind that the March trade deficit was at a record level, driven by a surge in imports that was a function of frontrunning the tariffs. With the April report, there is little question that the tariff actions upended import activity. The result is that there was a major dent made in the trade deficit, which President Trump will enjoy seeing. Another takeaway is that the plunge in imports will result in the net exports component making a materially positive contribution to Q2 GDP and economists raising their Q2 GDP forecasts.