A Mixed Bag 

* Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

DJIA 52-wk: +9.26% | YTD: -0.64% | Wkly: +1.60%

S&P 500 52-wk: +12.02% | YTD: +0.51% | Wkly: +1.88%

NASDAQ 52-wk: +14.21% | YTD: -1.02% | Wkly: +2.01%

iShares 20+ Year Treasury Bond ETF 52-wk: -4.61% | YTD: -1.20% | Wkly: +2.05%

During the shortened trading week of May 24–29, 2025, U.S. equity markets continued their upward trajectory, buoyed by easing trade tensions and robust corporate earnings.

All major indexes posted gains

These advances contributed to a strong May performance, with the S&P 500 achieving its best May since 1990, rising 6.2%, and the Nasdaq surging 9.6%—its most significant May gain since 1997. MarketWatch+1Barron's+1

Despite the positive momentum, uncertainties linger: MarketWatch

• Tariff Volatility: A U.S. court ruling declared some of Trump's tariffs illegal, though the decision was promptly appealed. Investors remain cautious about potential reinstatements or new tariffs, particularly affecting the semiconductor and pharmaceutical sectors. WSJ+3Financial Times+3MarketWatch+3
• Market Resistance Levels: The S&P 500 faces resistance near the 6,000 mark, with analysts citing ongoing trade policy uncertainties and potential inflationary pressures as factors that could impede further gains. Barron's

In summary, the week ending May 29, 2025, reflected a market buoyed by positive developments in trade and corporate performance, yet tempered by caution due to unresolved policy issues.

Bond Markets are Jittery – Should Investors Be Too?

Auctions for 20-year U.S. Treasuries are generally a routine, straightforward event that few investors pay much attention to.

That was not the case last week.

The auction for roughly $16 billion in 20-year debt featured unusually soft demand, with investors bidding up yields past 5%, well above the approximately 4.6% average seen in recent auctions. The 20-year bond joined 30-year Treasury yields above 5%, and the 10-year also continued to inch higher, crossing 4.6%. Stocks sold off sharply on the news.

In a past Mitch on the Markets column, I laid out three reasons why Treasury bond yields may move significantly higher:

1. Expectations for economic growth are going up, tied to expectations for pro-growth, pro-cyclical policies from the [current] administration.
2. Inflation expectations are going up, due to strong expected growth in an economy near full capacity or because of other factors, like trade policy (tariffs).
3. The bond market becomes increasingly concerned about fiscal health/sustainability, with growing deficits necessitating higher levels of bond issuance.

The concern is that yields are currently rising because of some combination of #2 and #3. The possibility of higher tariffs and higher government deficits (tied to the budget bill) aren’t helping.

Let’s start with the deficit issue. The starting point for the U.S. in 2025 is not great—the debt-to-GDP ratio is approaching a new all-time high, and the deficit relative to GDP is about 5% wider than it has historically been when the economy was at full employment. It is with this backdrop that “One, Big, Beautiful Bill” has passed the House of Representatives, which introduces tax cut extensions, new tax cuts, and spending provisions that are not fully paid for by cuts or new revenue. The implication is more annual budget deficits and additions to the national debt, which means more Treasury issuance. Yields are not likely to move lower in this scenario.

On the spending side, “One, Big, Beautiful Bill” introduces some spending cuts and measures like work requirements for Medicaid coverage, and the Department of Government Efficiency (DOGE) continues efforts to reduce government spending. But the scope of these spending cuts together is not likely to cover the cost of the tax cuts and annual government expenditures, which means shrinking the deficit is not likely. The Senate may demand more spending cuts in the bill, but the actual outcome remains to be seen. It’s understandable that bond markets are a bit wobbly in the meantime.

On the inflation side of the ledger, it is really all about whether tariffs remain in force, and for how long. In Trump’s first term, tariff threats were loud on the ‘bark’ but ultimately far more modest on the ‘bite.’ The tariffs that stuck were largely relegated to China, and corporations responded in many cases by rerouting trade through Vietnam and other intermediaries (including Mexico). U.S. markets and the economy did not feel much pain, and overall core inflation remained below 2% throughout this period.

We do not know where tariffs will end up for the wide variety of U.S. trading partners. But the baseline 10% universal tariff will arguably raise inflation at least moderately, perhaps to around 3% at the peak. Growth could also see an impact, given higher import costs and greater uncertainty. If Treasury yields go up in this case because of higher inflation and inflation expectations—without a corresponding acceleration in growth—that could trigger another correction in stocks, in my view.

There’s still time. Tariffs, growing budget deficits, and sluggish economic growth are not foregone conclusions, and sharply rising bond yields aren’t either. We could see a breakthrough in trade deals, changes could be made to One, Big, Beautiful Bill to make it more budget neutral, and inflation could remain in check as the economy remains fundamentally strong. U.S. Treasury bond yields could remain in a trading range under these circumstances, and the Fed may even find cause to lower the fed funds rate and steepen the yield curve in the process.

In 2023, acute worries over too much debt and deficit spending faded as inflation came down and the economy grew, fueling the bull market in stocks and pulling in foreign investment. The door is open for this possibility in 2025, too.

The artificial intelligence boom is roaring once again—and Nvidia NVDA (-2.92%) is reaping the benefits.

On Thursday, a post-earnings rally briefly made Nvidia the most valuable company in the world. By the close it was No. 2, just barely behind Microsoft MSFT (+0.37%), with a market value of $3.4 trillion. This came a day after the company reported solid fiscal first-quarter results and gave a better-than-feared revenue outlook for the current quarter.

But the numbers don’t do the quarter justice. Nvidia handled the loss of a massive business line and still generated impressive growth.

Revenue for the April quarter was up 69% year-over-year to $44.1 billion, ahead of expectations. Nvidia’s data-center business, primarily driven by AI chip demand, grew even faster, up 73% from last year to $39.1 billion.

To be sure, Nvidia’s guidance was more mixed. For the current quarter ending in July, Nvidia provided a revenue forecast range with a midpoint of $45 billion, which was below analysts’ consensus of $45.9 billion. It’s the first time since Nvidia started its AI supercycle two years ago that the chip maker disappointed with its outlook. But in recent weeks, some on Wall Street had come to expect much worse.

The cause of the miss is largely outside of Nvidia’s control. It stems from President Donald Trump’s decision in mid-April to effectively ban sales of the company’s H20 chips to China.

Nvidia wisely quantified the revenue impact at $10.5 billion in total across the April and July quarters. That helped investors quickly realize that Nvidia would have significantly raised guidance versus consensus if not for the H20 effect. It suggests there’s better than expected strength in the non-China business.

Sure enough, after an initial earnings bump, Nvidia’s gains accelerated in after-hours trading. On Thursday, the stock finished up 3.3%, making it one of the S&P 500 SPX (-0.01%)’s best performing stocks on the day.

The good news for Nvidia investors is the market is forward-looking. The China headwinds have been largely de-risked, with an outlook that’s reset for potential upside going forward.

Even with all the growth to date, Nvidia CEO Jensen Huang said demand for the company’s AI infrastructure products is still improving. “AI is this incredible technology that’s going to transform every industry,” he said on the earnings call with investors. “We’re really at the very beginning of it, because the adoption of this technology is in its early, early stages.”

Demand from the largest technology companies continues to rise. Heading into the latest earnings season, some on Wall Street were concerned that the industry would lower its full-year capex budgets to spend hundreds of billions on AI infrastructure amid macro uncertainty. Instead, the opposite has happened. Meta Platforms META (+0.38%) revealed it planned to spend more on AI and Microsoft said it was more supply-constrained for AI capacity than they anticipated.

Of course, robust demand doesn’t mean much if you can’t serve it. Nvidia’s management put to rest several supply side concerns this week too. Chief Financial Officer Colette Kress said the company’s Blackwell GPU production is ramping up, with major cloud computing companies now deploying nearly 1,000 top-of-the-line GB200 NVL72 server racks on a weekly basis. Each rack costs several million dollars. Kress said Microsoft alone is expected to purchase hundreds of thousands of GB200s to serve its customers.

More importantly, Nvidia’s next AI server, the Blackwell Ultra, is on track. The company sent test shipments of the Blackwell Ultra GB300 NVL72 AI server to some customers in May, Kress said, and expects to start production shipments later this quarter.

If You Like Dividend Stocks, You Might Love These ETFs

There’s more than one way to build a portfolio of dividend stocks. The classic move is to buy some individual large-cap stocks with long histories of making distributions, such as Procter & Gamble and Johnson & Johnson.

A newer option: exchange-traded funds, the premise of which is straightforward.

“Instead of picking a few stocks, in theory you’re reducing your risk by holding a broader portfolio of stocks,” says Bryan Armour, director of ETF and passive strategies research at Morningstar.

Jamie Cox, a financial advisor who is the managing partner at Harris Financial Group based in Richmond, Va., says that ETFs can offer a similar dividend yield to a portfolio of individual stocks but with lower risk. And for those investors who don’t have the time to research individual stocks, these ETFs can offer a good alternative.

ETFs can have the added advantages of tax efficiencies and much lower expense ratios compared with actively managed funds.

Armour divides dividend ETFs into three types: higher-yielding stocks, faster-growing dividends, or a combination of those two.

Two funds in the first bucket that he and his colleagues at Morningstar like are the Fidelity High Dividend ETF and the SPDR Russell 1000 Yield Focus ETF.

The latter fund, which yields 3.4%, aims to mimic the performance of Russell 1000 Yield Focused Factor index. Morningstar classifies it as a mid-cap value fund.

The fund “emphasizes cheap but profitable companies that collectively deliver better yield and generate more return on invested capital than the Russell Mid Cap Value index,” according to a Morningstar analysis.

As of May 23, its top holdings included Bristol Myers Squibb, which yields 5.3%; Cardinal Health, 1.3%; and Cummins, 2.3%. Year to date, the fund’s total return was minus 1.3%, including dividends, slightly behind the minus 0.8% for the S&P 500 index.

The fund makes quarterly distributions, a common practice among ETFs. That information is disclosed by the respective fund companies.

The Fidelity High Dividend ETF yields 3.2%. In selecting stocks, its managers consider the size of yields, which get a 70% weighting. That’s followed by dividend payout ratios and 12-month dividend growth rates, each with a 15% weighting.

Some of the fund’s top holdings are JP Morgan Chase, 2.2%; Apple, 0.5%; and Philip Morris International, 3%. It normally picks at least 80% of its securities from the Fidelity High Dividend index.

1) Monday: PMI

2) Tuesday: Earnings report from CrowdStrike

3) Thursday: Earnings report from Broadcom

4) Friday: Jobs report

The penduline could swing either way at this level. I’m impressed with the resiliency of the market, but still cautious about gambling at this height.

— Richie

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