Week ending May 2nd, 2025
From Wall Street to Main Street
Highlights from the past week
Market / Macro Economic Summary Markets rose for a second straight week as the indexes are slowly trekking their way back to the highs were we had been. While the tariff conversation now shifts towards hopeful resolution, markets have started to price-in the expectations of the matters being resolved. The Dow Jones rose 3% on the week and is now only down 2.9% down for the year. The S&P 500 rose 2.9% and is now only down 3.3% for the year. Lastly the Nasdaq seems to be building the most momentum recently as it rose 3.4% (after the 6% last week) and is now only down 6.9% on the year. Earnings Growth Mixed, Economic Growth Weakens, Jobs Market Remains Resilient First-quarter corporate earnings have shown strength, with a high percentage of S&P 500 companies exceeding expectations, leading to a robust 12.5% year-over-year growth. However, the outlook for the second quarter is less optimistic due to concerns about consumer behavior and the trade environment, resulting in a significantly lowered earnings growth forecast of 5.8%. On the economic front, U.S. GDP growth unexpectedly turned negative in the first quarter, falling by -0.3%, primarily driven by a surge in imports ahead of potential tariff increases. This was partially offset by solid personal consumption (1.8%) and strong business investment (21.9%). Despite the GDP contraction, a recession is not currently the anticipated scenario. The U.S. labor market continues to demonstrate strength, with April nonfarm payrolls adding 177,000 jobs, surpassing expectations. Although March figures were revised down, the three-month average of job gains remains healthy at 155,000. The unemployment rate held steady at 4.2%, still below historical averages. I continue to believe that we do not see a recession although I remained concerned that we’re not “out of the woods” yet since I feel like the impacts of the current tariffs in place have not been felt in the economic data just yet. Company Specific / Micro Economic Summary Pfizer (PFE) Shares were up roughly 2% as CEO, Albert Bourla, expressed concerns that the uncertainty surrounding President Donald Trump's proposed pharmaceutical tariffs is hindering the company's investment in U.S. manufacturing and R&D. This comes as pharmaceutical companies prepare for potential levies on imported drugs, a move aimed at bolstering domestic manufacturing. Pfizer anticipates $150 million in costs from existing tariffs this year. Despite nearly meeting revenue expectations at $13.7 billion (compared to the $14.0 billion estimate), Pfizer significantly outperformed analyst predictions for earnings per share, reporting $0.92 versus the expected $0.67. Apple (AAPL) Shares experienced a roughly 2% decline despite the company's second fiscal-quarter earnings for 2025 exceeding Wall Street's projections for EPS ($1.65 vs. $1.63 estimated) and revenue ($95.4 billion vs. $94.66 billion estimated), with iPhone revenue also surpassing expectations at $46.84 billion. However, the Services division's revenue of $26.64 billion fell slightly below the $26.71 billion estimate. CEO Tim Cook highlighted that tariffs are expected to increase the company's costs by approximately $900 million in the current quarter, with future impacts being uncertain. In response to these tariffs, Apple has been diversifying its sourcing, with about half of the iPhones for the U.S. now originating from India and the majority of other products for the U.S. being sourced from Vietnam, where tariff rates are lower compared to China. Microsoft (MSFT) Shares jumped approximately 9% in after-hours trading following the release of its better-than-anticipated quarterly results. For the fiscal third quarter ending March 31, the company reported revenue of $70.07 billion (versus $68.42 billion expected) and earnings per share of $3.46 (compared to the $3.22 estimate), marking a 13% year-over-year increase in revenue and an 18% rise in net income to $25.8 billion. Looking ahead, Microsoft projects revenue in the range of $73.15 billion to $74.25 billion, exceeding consensus estimates, and anticipates Azure growth of 34% to 35% at constant currency, also surpassing expectations, while indicating that capital expenditures will continue to rise in the next fiscal year, albeit at a slower pace. Facebook (META) Following a first quarter that saw stronger-than-anticipated revenue, Meta's shares experienced a surge of up to 5%. The company projects second-quarter revenue between $42.5 billion and $45.5 billion, though they have observed a slight decrease in ad spending from Asian e-commerce exporters, according to finance chief Susan Li. Bolstering its artificial intelligence initiatives, Meta has increased its 2025 capital expenditure forecast to a range of $64 billion to $72 billion, primarily due to heightened infrastructure hardware costs and additional data center investments. In the first quarter, Meta's sales grew by 16% year-over-year, reaching $42.31 billion against an expected $41.40 billion, while net income climbed 35% to $16.64 billion, with earnings per share at $6.43, significantly exceeding the $5.28 expectation. Amazon (AMZN) Despite reporting better-than-expected top and bottom-line results, Amazon's shares remained flat. While Amazon Web Services' revenue grew by 17% to $29.27 billion, this fell slightly short of the $29.42 billion analyst estimate, marking a slowdown in growth from the previous quarter. The company is also anticipating potential impacts from recently announced sweeping tariffs on imported goods to the U.S., which are causing some industries to prepare for increased costs or reduced demand. Looking ahead, Amazon plans significant capital spending of roughly $105 billion in 2025, a portion of which will be allocated to building data centers equipped with AI-training chips for clients like Anthropic. Parting Thoughts We welcome an opportunity to discuss the above detail and wish you much success in the rest of your week! Regards, Erick J. Palacios, MBA Wealth/Fiduciary AdvisorPlan to Prosper Wealth Management’s clients & employees will from time-to-time hold securities mentioned above. Commentary is not endorsements or recommendations of any securities.