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U.S. stocks saw mixed performance on Thursday as investors analyzed Walmart's WMT tariff-impacted earnings and assessed fresh data on retail sales and inflation to gauge the health of the economy. Moreover, the tech sector slumped on May 15. The tech-heavy Nasdaq Composite dipped 0.2%, snapping a six-day winning streak.
Note that while inflation data for April remained cooler than expected, there are warning signs of future price increases. A recent Institute for Supply Management survey showed that 87% of manufacturers plan to pass on at least some anticipated cost increases to consumers.
Below we highlight a few factors that demand investors need to be cautious in the near term.
Trade Tensions Linger Despite India’s Tariff Offer
With enthusiasm over the U.S.-China trade truce fading, markets are now searching for the next major catalyst. On May 15, President Trump announced that India has proposed to eliminate tariffs on U.S. goods as part of a potential trade agreement.
Walmart Warns of Rising Prices Amid Tariffs
Walmart revealed in its quarterly report that rising tariffs are forcing the company to increase prices, as it can no longer absorb the added costs. CFO John David Rainey stated that some price increases could reach double digits and will begin impacting consumers later this month.
Retail Sales Slump While Inflation Cools
Retail sales saw a significant slowdown in April, rising only marginally—a sharp contrast to the consumer spending surge seen in March prior to new tariffs taking effect. At the same time, wholesale inflation unexpectedly decreased. The Producer Price Index (PPI) dropped 0.5% for the month and increased by 2.4% annually. The Consumer Price Index (CPI) also showed inflation easing to a four-year low.
Fed Eyes Economic Uncertainty and Inflation Volatility
Federal Reserve officials, including Chair Jerome Powell, continue to monitor incoming data for signals about the economy’s direction. Powell emphasized growing uncertainty and warned that the United States may face more frequent “supply shocks” and unstable inflation in the near future.
U.S. Recession Risks Not Out Yet
JPMorgan CEO Jamie Dimon said there is still “uncertainty” on the tariff front but the pauses are a positive for the economy and market. Michael Feroli, the firm’s chief U.S. economist, said in a note to clients on Tuesday that the recession outlook is “still elevated, but now below 50%,” as quoted on CNBC.
Tech to Lose & Defensive to Gain?
Market behavior on May 15 marked a shift in sentiment, as technology stocks lost momentum. In contrast, defensive sectors such as Utilities and Consumer Staples outperformed, each gaining more than 2% and helping push the S&P 500 into positive territory.