Trump’s Powell Replacement Plans, Weak Economic Data, Send Stocks Towards Records: June 26, 2025

Markets are rallying as weaker-than-projected economic data coincide with news that President Trump will announce Fed Chair Powell’s replacement earlier than expected. The one-two punch of softer activity figures and the new leader of the central bank being named in September or October is bolstering rate cut wagers and sending the yield curve south in bull steepening fashion. Indeed, the short-end, which is more responsive to monetary policy expectations, is leading the way lower while duration drops at a lesser degree. Meanwhile, participants are patiently waiting for news on trade and taxation, with deadlines coming up, while crossing their fingers for continued peace in the Middle East. The drivers for equity and Treasury bulls in the domestic economic calendar, however, were the tallest level of continuing unemployment claims since November 2021 and an ugly downward revision to first-quarter consumer spending, which brought consumption volumes to their lowest since the pandemic recession. And while households curtailed services expenditures in lieu of necessities, durable goods and pending home sales exceeded estimates, with the former helped by robust business investment and aircraft purchases. Investors are responding by scooping up shares in every sector minus real estate, locking in fixed-income products and picking up commodity futures across the complex as well as expressing interest in bitcoins and forecast contracts. The greenback and volatility protection instruments are facing selling pressure on the back of anticipations of easing financial conditions and risk-on animal spirit.

Durable Goods Fly High

After plunging in April due to buyers frontrunning purchases to avoid tariffs, durable goods orders bounced back last month, climbing 16.4% m/m, according to preliminary estimates. The result was nearly twice the estimate for an 8.6% gain following the 6.6% decline in the preceding measurement period. Without defense, the metric was up 15.5%, subsequent to April’s 7.7% plunge. Most of May’s growth, however, resulted from strong transactions for aircraft, with the durable goods excluding transportation component increasing only 0.5%, surpassing the expectation for a goose egg, which would have been unchanged m/m. The transportation category jumped 48.3% with a Boeing order from Qatar Airlines for 303 jets driving the aviation component up 231% m/m. Nondefense capital goods minus airplanes, a proxy for business investment, advanced 1.7% m/m, and pointed to continued momentum on the expansion front, a key goal of the Trump administration.

GDP Revisions Shows Larger Decline

The final print of first-quarter gross domestic product depicts a 0.5% decline, slightly worse than the previous Commerce Department estimate of a 0.2% fall. GDP expanded 2.4% in the fourth quarter. A surge of imports in the recent quarter detracted from first-quarter performance as businesses and households alike strived to acquire items prior to the implementation of Trump tariffs. Consumer spending was revised down to a growth rate of 0.5% on lighter services outlays, additionally, driving the overall expenditure figure to the weakest since the pandemic recession.

Hiring and Firing Is Muted

Restrained hiring and firing persisted during the past two weeks with continuing unemployment claims reaching the highest number going back to November of 2021 while the figure for first-time requests for benefits declined.

Initial unemployment claims of 236,000 for the week ended June 21 sank from 246,00 in the preceding reporting timespan and were below the 244,000 economist estimate, illustrating that employers are holding onto workers. Conversely, filings for continuing unemployment claims, a proxy for the difficulty idle individuals have when seeking work, climbed to 1.974 million for the 7-day period finishing on June 14, a 37,000 increase and a level not experienced since late 2021. 

Four-week averages moved from 245,750 and 1.924 million to 245,000 and 1.941 million.

Pending Home Sales Bounce Back

Residential contract signings increased more than expected in May after tanking in April, according to the National Association of Realtors. Pending home sales, a leading indicator of closed transactions, climbed 1.8% m/m after falling 6.3% in the preceding period. The recent result surpassed the prediction of -0.3%.  Sales in the Northeast, Midwest and South grew 7.1%, 2.1% and 1.7%, but they dipped 5.4% in the West.

Rally Strengthens if PCE Arrives at 2.2%

The market rally will go bonkers if tomorrow’s PCE print comes in below the median estimate of 2.3%, as it will strengthen the argument and provide more statistical evidence of a US central bank that is currently too tight. The previous rate cut was in December and there is no reason for the Fed to be at an upper end of 4.5% with inflation in the low 2s. I’m not supporting a sprint down the monetary policy stairs, ladies and gentlemen, because we still have risks of price pressures on the horizon, specifically related to goods. But I am in favor of a quarter-point trim followed by a wait-and-see approach. Being overly patient on rates makes the economy vulnerable if labor conditions begin to turn south significantly. Meanwhile, some accommodation will be similar to last fall, when a reprieve on the Fed’s benchmark was met with accelerating hiring and buoyant capital markets.

International Roundup

Singapore Production Falters

As the July 9 deadline for various countries to reach trade deals with the US to avert facing higher tariffs from the world’s largest economy approaches, Singapore’s May industrial production has dipped 0.4% m/m. The month was better than the forecast for a 2.5% drop, but it was a reversal from the 4.9% expansion in April as the impact of companies front running orders prior to the US implementation of import tariffs dissipated. Output was still 3.9% higher than in the year-ago period, which surpassed the estimate of 2.6% but fell below the 5.6% y/y result in April.

Hong Kong Trade Deficit Widens

Hong Kong’s imports in May grew faster than its exports, causing the special administration region’s trade deficit to grow from $16 billion in April to $27.3 billion. Exports were 15.8% higher y/y and imports increased 18.9%. Hong Kong expanded its exports to Asian countries by 21.8% but shipments to the UK and US descended 52% and 18.4%, respectively. More broadly, shipments of office machines and data processing items grew 44.9% while electrical machinery, apparatus and appliances, and electrical parts headed north by 15.5%.

Canada Wholesaling Falters While Wages Climb

Wholesaling sales in May sank 0.4% m/m in Canada, a less severe contraction than the 2.3% print in April, according to an advance estimate from Statistics Canada. Depressed transactions for machinery, equipment and supplies are to blame. Workers in April, however, were paid 4.4% more than in the year-ago period, a faster increase than March, when the metric advanced 4.1%.