Wall Street’s hopes that Donald Trump’s tariff war is cooling drove stocks to their second-best week in 2025, with the S&P 500 rising for a fifth straight session despite a soft reading on consumer sentiment.
After erasing this year’s losses, equities kept pushing higher as a U.S.-China trade truce bolstered speculation the White House is moderating its approach to negotiations.
That’s driven the risk-on tone that has a host of investors positioning for the American stock benchmark to eclipse its February record in coming months, climbing from the brink of a bear market just weeks ago. Since last Friday, the S&P 500 has risen about 5%.
Action in the bond market was muted, though Treasuries headed for a third straight weekly drop — the longest losing streak this year. The dollar rose despite data showing sentiment among options traders is the most negative in five years.
President Trump’s attempts to shake up global trade left U.S. equities out of favor earlier this year. But there are signs that investors are returning.
Fund managers added about $20 billion to American stock funds in the past week, the first inflow to the region in more than a month, according to EPFR Global data cited by Bank of America Corp.
“The fear of bad tariff outcomes appears to be fading quickly,” said Louis Navellier, chief investment officer at Navellier & Associates. “Overall, a solid week, and momentum remains to the upside.”
Trump said he would set tariff rates for U.S. trading partners “over the next two to three weeks,” asserting there are “150 countries that want to make a deal.” While investors have little clarity on how negotiations will unfold, the absence of bad news on the trade front helped firm market sentiment.
Traders were able to look past data showing U.S. consumer sentiment unexpectedly fell and inflation expectations climbed to multi-decade highs. Given the recent de-escalation of trade tensions with China, Capital Economics’ Alexandra Brown expects a marked rebound in sentiment next month.
The S&P 500 rose 0.4% as of 2 p.m. Friday in New York. The Nasdaq 100 added 0.1%. The Dow Jones Industrial Average gained 0.5%.
The yield on 10-year Treasuries was little changed at 4.44%. The Bloomberg Dollar Spot Index rose 0.2%.
Since the U.S.-China truce, several banks across Wall Street have been watering down calls for a recession. Renewed optimism around trade deals has propelled American stocks ahead of several global benchmarks this week.
In fact, the S&P 500’s advance is the fifth biggest among 92 primary equity indexes tracked by Bloomberg.
The shift came after a period in which Wall Street money managers grew skeptical about the U.S. equity market and started to pull away from growth stocks and rotate into defensive names, due to escalating concerns from trade wars to economic growth and geopolitical tensions.
In the first three months of the year, hedge funds boosted positions in healthcare stocks while reducing exposure in the technology sector. Bloomberg has so far analyzed 13F filings by 736 hedge funds.
Their combined holdings amounted to $530.04 billion, compared with $553.02 billion held by the same funds three months earlier.
The furious comeback in U.S. equities from the depths of last month’s rout is poised to come to a halt, according to Morgan Stanley’s Lisa Shalett.
The chief investment officer of the bank’s wealth management division says decelerating revenue growth from the Magnificent Seven megacap companies and waning earnings momentum more broadly will limit further market upside after a double-digit recovery in the S&P 500 Index from April’s lows.
“I think we’re going to stall out here,” Shalett said Friday in an interview with Bloomberg Surveillance. “It’s hard to justify the numbers.”
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