Weekly Market Commentary May 27, 2025

Markets started last week on a quiet note but quickly shifted gears as a flurry of economic data arrived in the second half. Key reports on housing, business sentiment, and inflation expectations gave investors fresh insight into the state of the economy—and where it might be headed.

Housing data was mixed but revealing. April’s existing home sales came in at 4.0 million, slightly below the 4.15 million forecast but flat from March, suggesting some stability. In contrast, new home sales surprised to the upside at 743,000, well above the 694,000 estimate and up 10.9% month-over-month. Adding to the optimism, building permits were revised upward, hinting that builders may be more confident about future demand than previously thought.

Thursday’s preliminary May Purchasing Managers’ Index (PMI) data showed improving sentiment in both manufacturing and services. Manufacturing, in particular, saw a notable shift from pessimism to cautious optimism, suggesting purchasing managers may be regaining confidence after a rocky April.

Treasury auctions last week offered fresh insight into market sentiment around inflation and credit risk. Yields on the 20-year bond and 10-year Treasury Inflation-protected Securities (TIPS) moved higher, but the rise appears more closely tied to shifting inflation expectations than to concerns over credit quality. This is particularly notable given Moody’s downgrade of U.S. credit earlier this month, a move that initially raised some alarms. However, the concurrent rise in 10-year breakeven rates suggests markets are more focused on inflation risks than on a deteriorating credit profile.

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