Last week saw strong gains across major indices as markets responded positively to renewed progress in U.S.-China trade relations. The S&P 500 ETF (SPY) rose approximately 5.29% for the week, led by Monday’s sharp 3.3% rally following news of tariff relief measures. The Dow Jones Industrial Average (DIA) also ended the week in positive territory—up 3.43%—despite mid-week pressure from the healthcare sector.

The tech-heavy Nasdaq (QQQ) outpaced broader markets, gaining 6.87% and officially entering bull market territory with a rise of more than 20% from April lows. Broader market sentiment was supported by improving breadth and renewed momentum, with many investors viewing the rally as confirmation of a potential trend reversal. At the same time, earnings season remained active, with dozens of companies reporting results that generally exceeded analyst expectations, even amid persistent inflation concerns.

Looking ahead, market participants will be watching Coinbase’s inclusion in the S&P 500, replacing Discover Financial Services—a milestone moment for cryptocurrency-related companies in mainstream finance. Additionally, attention will turn to comments from Federal Reserve officials, as markets look for clues on the outlook for interest rates ahead of the June meeting.

📅 Thursday, May 22nd

• Unemployment Claims: The upcoming Initial Jobless Claims report is forecast at 227,000, which would represent a slight decrease from the previous week’s unchanged figure of 229,000, suggesting continued resilience in the labor market despite recent volatility. Market participants should closely monitor the 4-week moving average (currently at 230,500) and continuing claims (last reported at 1.881 million) for clearer indications of labor market trends beyond weekly fluctuations. Traders will be particularly focused on whether claims remain below the psychologically important 230,000 threshold, as sustained increases above this level could signal labor market deterioration.

• Flash Manufacturing PMI: The Flash Manufacturing PMI report is forecast to decline to 49.9 from the previous reading of 50.2, potentially signaling a shift from marginal expansion to contraction in the US manufacturing sector. This sub-50 reading would indicate deteriorating manufacturing conditions for the first time in five months, with particular focus on how the recent pause in additional US-China tariffs has impacted business sentiment and export orders. Market participants should closely monitor comments regarding supply chain disruptions, input cost inflation (which reached a two-and-a-half-year high in recent months), and business confidence, which remains subdued amid tariff-related margin pressures and softening global demand.

• Flash Services PMI: Market participants should prepare for the upcoming Flash Services PMI with forecasts pointing to a slight dip to 50.7 from April’s reading of 50.8, suggesting minimal but continued expansion in the services sector. While the anticipated reading remains above the critical 50.0 threshold separating growth from contraction, the marginal decline could signal slowing momentum following the significant drop from March’s 54.4 to April’s 50.8, reflecting ongoing concerns about tariff impacts and economic uncertainty.
  
  Traders should closely monitor the report’s employment component, which has remained in contraction territory, alongside the prices charged index, which rose sharply in April to a 13-month high. These metrics will provide essential insights into labor market conditions and inflationary pressures that could influence Federal Reserve policy decisions in the coming months.

Earnings season continues. Here are some of the companies set to report this week:

📅 Tuesday, May 20th

• Home Depot, Inc. (HD): Home Depot is scheduled to release its Q1 earnings results with analysts forecasting earnings of approximately $3.60 per share on revenue of $39.35 billion, representing a year-over-year earnings decline of about 1% but revenue growth of 8%. Market participants should closely monitor same-store sales, which are expected to increase 0.28% after turning positive in the previous quarter following eight consecutive quarters of declines. Key focus areas will include management’s comments on consumer spending trends for larger discretionary projects, the impact of tariffs on their global supply chain, and any potential updates to their fiscal 2025 guidance, which currently projects 1% growth in annual comparable sales.

📅 Wednesday, May 21st

• Target Corporation (TGT): Target will report its earnings with analysts expecting EPS between $1.14-$1.68 against projected revenue of $23.8-24.46 billion, amid concerns of a 1-4% same-store sales decline year-over-year. Market participants should monitor whether Target maintains its full-year EPS guidance of $8.80-$9.80 or follows analysts’ expectations of a downward revision to approximately $7.00, while also paying attention to margins which reached 5.3% in operating income during Q1 2024. Key metrics to watch include digital sales growth (previously 8.7% in Q4 2024), same-day services performance (which grew over 25% last quarter), and the performance of Target’s beauty segment, which has been a rare bright spot amid challenging conditions in discretionary merchandise categories.

• Medtronic (MDT): Medtronic is scheduled to report its earnings with analysts expecting earnings per share of $1.58 (an 8.2% year-over-year increase) on revenues of $8.81 billion (up 2.56% from the same quarter last year). Market participants should closely monitor performance across key segments, particularly Cardiovascular (projected at $3.27 billion), Diabetes (expected to reach $700.27 million with 6.1% growth), and the impact of currency headwinds which management previously indicated could negatively affect quarterly results by $125-$175 million. Key growth drivers to watch include adoption rates of the MiniMed 780G insulin pump, pulsed field ablation products, and whether the company reaffirms its full-year organic revenue growth guidance of 4.75-5% amid ongoing challenges from inflation and an evolving global tariff environment.

📅 Thursday, May 22nd

• Advance Auto Parts Inc. (AAP): Advanced Auto Parts will release its earnings report on Thursday, following a challenging previous quarter that saw revenue of $2 billion (down 1% year-over-year) and triggered a steep 17.8% stock drop despite beating EPS expectations with a narrower-than-expected loss of $1.18, market participants will be closely monitoring whether the company can reverse its negative earnings trajectory after posting a full-year EPS of -$5.61 in 2024 compared to $0.50 in 2023 and $7.65 in 2022. Key metrics for investors to focus on include whether AAP can achieve top-line growth exceeding 3%, improvements in gross margins amid inflation and supply chain pressures, and performance of digital initiatives like “Click & Collect” and “ProTech” platforms that could offset potential headwinds in physical store sales.

• Toronto Dominion Bank (TD): TD Bank will release its earnings with analysts expecting EPS of around $1.29 and revenues of approximately $9.74 billion, representing a 6.2 % year-over-year increase. Following its Q1 2025 results that showed adjusted EPS of $2.02 (up 1% year-over-year) and a strong CET1 (Common Equity Tier) ratio of 13.1%, market participants should monitor how the bank’s recent sale of its 10.1% Schwab stake affects its financial position and capital deployment strategy. Key focus areas should include the bank’s anticipated “substantial expansion” in net interest margin from balance sheet restructuring activities, progress on its $8 billion share buyback program, and elevated expenses related to governance and control investments, particularly the approximately US$500 million earmarked for U.S. BSA/AML remediation efforts in fiscal 2025.

We hope this helps and happy trading!

– Trade and Travel Team