Trade Progress, Benign Inflation, Catapult Stocks To Records: June 27, 2025

Stocks are reaching records today as trade deal optimism concurs with economic data signaling benign inflation amidst expectations of cooperative prices. News that Washington and Brussels are moving closer to an agreement is coinciding with encouraging progress on a New Delhi settlement. Furthermore, confirmation from Beijing of its pact with the US is also brightening the outlook for cross-border commerce and bolstering global growth prospects. Presidential cabinet members Lutnick and Bessent were enthusiastic about incoming accords, which also supported investor sentiment. Meanwhile, the PCE and UMich prints this morning pointed to tame cost trends alongside reduced nervousness among consumers that charges would move considerably higher in the future. Shopper momentum was disappointing last month, however, as households focused their expenditures on staples while neglecting discretionary services such as flying, staying at hotels and frequenting restaurants and drinking parlors. Traders are scooping up shares in all sectors minus energy, increasing their exposures to natural gas and crude oil commodities, copper and lumber, and buying bitcoins and forecast contracts. Conversely, folks are dropping Treasuries across the curve, unwinding volatility protection holdings and trimming gold, silver and greenback wagers.

US Shoppers Scale Back Outlays

Consumer spending retreated last month as households flipped the light switch south following decent activity in March and April. Shopping volumes, which are adjusted for inflation, dropped 0.3% month over month (m/m), with durable goods and nondurables weighing on the headline, falling 1.8% and 0.3%. Services didn’t counter the negative impact from physical products, coming in unchanged during the period.

Incomes fell even more, though, sinking 0.5% on government social benefit declines and farmer earnings. The wider spread between individual revenues and outlays drove a decline in the personal savings rate from 4.9% to 4.5%.

Consumer Sentiment Revised Upward Marginally

The University of Michigan’s (UMich) final consumer sentiment print was upgraded from 60.5 to 60.7 as households’ anxiety regarding inflation eased slightly. Price pressure expectations were revised lower by 0.1% across both the 1- and 5-year time horizons, landing the final numbers at 4% and 5% for June.

Equity Complete First Half of Year on High Note

Stocks are ending the first half of the year on a high note as notable progress on trade is quelling some of the uncertainty on the horizon. Meanwhile, inflation data is proving so far that tariffs aren’t raising costs across the economy as much as feared and that is music to the ears of equity market bulls. We’ll have more pivotal data next week, which will be shortened due to Independence Day. Nevertheless, nonfarm payrolls, ISM-manufacturing and services, ADP employment, job openings, construction spending and more are on deck. But what could dominate the market narrative, however, would be cross-border commerce details and taxation developments. 

International Roundup

Japan Retailing Declines

Japan retail transactions sank to the lowest level in three months during May, growing only 2.2% year over year (y/y) after April’s 3.5% expansion, according to the country’s Ministry of Economy, Trade & Industry. The result missed the forecast of 2.4%. Relative to April, sales were down 0.2%, weakening significantly from the 0.7% m/m gain in the preceding measurement timeframe. Results were worse among large retailers with cashier activity falling 0.2% m/m but increasing 2% y/y compared to growth of 0.7% and 3% in April.

On a positive note, the Pacific nation’s May unemployment rate, at 2.5%, was unchanged, as expected, and inflation eased with the Tokyo CPI depicting prices being 3.1% higher y/y following May’s 3.4% result.

Manufacturing Weakness Pulls Down Canadian Economy

The Canadian economy contracted 0.1% m/ in May, matching April’s result, according to Statistics Canada. For the April revision, economists anticipated a goose egg.  Manufacturing weakness is weighing heavily upon the country’s gross domestic product as trade tensions with the US continue.