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Confidence Heats Up as Earnings Torch Estimates

2025-05-30

Paul Eitelman, CFA

Paul Eitelman, CFA

Global Chief Investment Strategist




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Hi, I'm Paul Idleman, chief investment strategist for Russell Investments, and this is the market weekend review for the week ending May 30th, 2025. Um, I say three themes stood out to me this week. First, from a markets perspective, a broad risk on tone on the week. Uh second, in terms of the economic data, we're starting to see some signs of life in the surveys, which have been quite weak, but uh now a little bit of a rebound in consumer confidence, but also business capex intentions, which is encouraging to see. Uh and the third and finally, we're towards the end now of the first quarter earning season and on balance that's been pretty strong and I think those fundamentals are are part of why uh markets have been uh resilient and positive here in the period. Uh but starting with the uh the market results um and this has been a holiday shortened week here in the United States with the Memorial Day holiday. But even with that, the S&P 500 index is up 1.9% on the week through Thursday's close here in Seattle. That's obviously a good return and has modestly outperformed uh positive results globally with MCI All Country World Index also up a little over a percent. Uh if you zoom out even a little bit further than that, the the market rally off of the lows in early April has just been really phenomenal for the month of May as a whole, uh we're tracking over a 6% return on US equities, which is just really uh outstanding. um moving away from equities in in sort of the fixed income market space. Credit spreads have traded tighter here over the past several weeks and are now um towards the the tightest that we've seen in this post liberation day period. Uh and then around sort of the government bond market where there had been some jitteriness towards higher yields in recent weeks. uh some of that's some of that pressure has come out of the market and we've actually seen the uh 10-year Treasury yield in the US decline by uh eight basis points so far this week. So in short with credit spreads tight, bond yields declining and equity markets higher uh most sort of uh of the broad asset classes have been strong here in the period. Um second just around uh some of the soft survey data here. Again we're seeing some signs of life. Uh this have been sort of an area of weakness um in the data recently. Um but two I think positive tones this week. First around the consumer the conference board measure of consumer confidence did rebound pretty noticeably uh this week for the month of May. Um which is encouraging. We've seen some resilience in uh actual consumer spending uh but this pessimism and it seems like at the margin uh confidence is gravitating back up towards what has been a stronger reality. Uh and then around the corporate sector we've gotten a number of uh the regional Fed manufacturing surveys actually all five of them uh now for the month of May. And one of the things that really stands out there is a notable rebound in uh manufacturing companies capex intentions for the next six months uh where those um intentions are now back all the way where to where they were at the start of 2025. So a nice bounce back from uh previously weak levels uh when businesses were much more concerned about uh tariff risk onto their uh investment plans. Uh and then third and finally the earning season. Um we're wrapping up now with um the last of the big tech companies having reported this week. Say on balance the the results there have been very strong in the US. We're tracking around eight uh excuse me 15% earnings growth in the first quarter on a year ago basis and that's almost a doubling of where consensus expectations were coming into uh this reporting period um with the consensus looking for closer to 8% growth. So, a really nice positive surprise. And um under the hood of that, while there were certainly broad-based strength, um some of the the technology companies in particular have been a source of fundamental resilience and strength here uh in the recent period and they're obviously a a big waiting uh in the US market uh which has helped to support um this rally here recently. So, I think those are the key takeaways uh this week. Thanks for tuning in. We hope to see you again soon. Bye. Hi, I'm Sophie, head of portfolio and business consulting at Russell Investments. If you liked what you just saw and heard, consider subscribing to our YouTube channel or check us out on LinkedIn. Thanks for tuning in.

Key Takeaways

  • Strong rally in U.S. stocks
  • Consumer confidence rebounds
  • Q1 earnings shatter expectations 

On this week’s edition of Market Week in Review, Chief Investment Strategist Paul Eitelman recapped recent stock and bond market performance. He also discussed the rebound in consumer confidence and first-quarter earnings. 

Rally Time

U.S. stocks rose during the holiday-shortened trading week, with the S&P 500 advancing nearly 2% through Thursday’s close. Stocks also performed well globally, with the MSCI All-Country World Index rising slightly above 1%.

Eitelman said the stock market’s broad rally since early April has been nothing short of phenomenal. For instance, the S&P 500 has shot up over 6% during May alone—a move he called outstanding.

The good news has also carried over to the fixed income space, where credit spreads have narrowed significantly. “Spreads are now the tightest they’ve been since President Trump’s ‘Liberation Day’ announcement,” Eitelman said.

Government bond yields have also ticked lower over the past few weeks, soothing investors rattled by April’s big upward spike. This includes the yield on the 10-year Treasury note, which fell 0.08% this week, Eitelman said. 

Open to Optimism

In another positive development, there are hints that confidence among U.S. consumers and businesses is on the rebound. “We’re seeing signs of life in the latest surveys, following some pretty weak numbers in April,” Eitelman said. As evidence, he pointed to The Conference Board’s measure of consumer confidence, which increased by 12 points from April to May.

“This encouraging news also suggests the gap between how consumers feel and how consumers act—the difference between soft and hard data—might be narrowing,” Eitelman remarked.

U.S. businesses also appear to be more optimistic about the overall environment. The latest regional Fed manufacturing surveys show a notable rebound in companies’ plans for future spending, he explained.

“Capex intentions are now back to where they were at the start of 2025. That’s a notable bounceback from the weaker levels we saw the last few months, when businesses were much more concerned about the impact of tariffs,” Eitelman said. 

Upside Surprise

First-quarter earnings season is wrapping up in the U.S. with generally strong results. Earnings growth for the quarter is tracking around 15% on a year-over-year basis—double what consensus expectations were coming into the reporting period, Eitelman noted.

“This has been a nice positive surprise. We’ve seen broad-based strength across the S&P 500, with some of the tech companies in particular really being sources of resilience,” he concluded.

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