Volatility in U.S. Markets: A Natural Pullback After the Rally and the Impact of External Factors
Market News 06 may
U.S. equity indices closed lower on Monday, interrupting the S&P 500’s impressive nine-day winning streak. Investors were influenced by President Trump’s comments on China trade, unexpected ISM services data, and fresh signals from OPEC+ in the oil market.
Geopolitics and Trade Uncertainty
Over the weekend, Donald Trump said he does not currently plan to discuss trade issues with China’s President Xi Jinping. At the same time, he suggested new trade deals with certain partners could be concluded this week. Those remarks added uncertainty to markets as investors questioned the prospects for easing tensions between the world’s two largest economies.
Support from the Services Sector and a Short-Term Pullback
Despite the negative backdrop, April’s U.S. ISM Services PMI unexpectedly rose to 51.6 (versus forecasts of 50.2), and its prices sub-index hit a 2½-year high at 65.1. These stronger-than-expected figures eased recession fears but could not prevent the S&P 500 from falling 0.6% on the day, with intraday losses reaching 0.9%.
This decline appears to be a natural pullback following a strong April rally, during which the index rose out of correction territory and held above its 50-day moving average.
Energy Sector and Oil Price Dynamics
Energy stocks suffered the steepest losses, dropping nearly 2.0%, after OPEC+ agreed to boost production by 411,000 barrels per day starting in June. West Texas Intermediate crude fell to $57.16 per barrel—a three-and-a-half-week low. Saudi Arabia’s hint at further output increases to punish high-producing members like Kazakhstan and Iraq drove concerns of a bloated global supply.
Mega-Caps and Technology Under Pressure
The Vanguard Mega Cap Growth ETF (MGK) slid 0.7%, and the Invesco S&P 500 Equal Weight ETF (RSP) fell 0.3%. Consumer discretionary dropped 1.3% and technology 0.9%, as investors awaited Wednesday’s FOMC decision, expected to leave the fed-funds rate at 4.25–4.50%. Fed Chair Powell’s post-meeting remarks will be closely scrutinized for policy clues.
Bond Market Moves
Following the resilient ISM data, 10-year U.S. Treasury yields climbed two to three basis points to 4.34–4.37%. A $58 billion three-year Treasury auction drew a 2.56 bid-to-cover ratio—below the 10-auction average of 2.61—putting further pressure on prices. In Europe, Germany’s 10-year bund yield eased to 2.517%, while U.K. markets were closed for the May holidays.
Earnings Season: Key Takeaways
So far, 78% of the 365 S&P 500 companies reporting have beaten earnings estimates, yet quarterly profit growth of about 6.7% y/y lags early-year expectations. Full-year 2025 earnings growth is now seen at +9.4%, down from +12.5%. Notable moves include:
Zimmer Biomet (ZBH): Shares plunged over 11% after lowering its full-year EPS outlook.
ON Semiconductor (ON): Despite topline beats, shares fell 8%.
Apple (AAPL): Down over 3% ahead of a bond offering.
Berkshire Hathaway (BRK.B): Dropped 5% on Buffett’s planned retirement announcement.
Gold Fields (GFI) & peers: Up 2–7% on a rally in gold prices.
Freshpet (FRPT), Axsome Therapeutics (AXSM), EQT Corp (EQT), Henry Schein (HSIC): Shares rose following better-than-expected results.
What’s Ahead This Week
Tuesday: March trade-balance report (deficit expected at $136.7 billion).
Wednesday: FOMC decision and Fed Chair Powell’s press conference.
Thursday: Weekly jobless claims, Q1 productivity and unit-labor-cost data.
Markets now price only a 2% chance of a rate cut in June. Investors will weigh macro data, corporate earnings, and geopolitical developments to determine whether the indices can find support or extend their pullback.