Last Week
The lyrics of the Four Tops were the same old song, with Trump and Powell setting the beat. This latest verse was a slightly hawkish interest rate decision from the Federal Reserve, offset by some positive sentiment on trade after U.S. President Donald Trump announced a deal with the United Kingdom. On Wednesday, the Fed’s monetary policy committee kept the key federal funds rate unchanged. It warned of a potential stagflation risk, as Fed Chair Jerome Powell reprised, “We think our policy rate is in a good place as we wait for further clarity on tariffs”. President Trump unveiled a trade pact with the UK on Thursday, albeit just an outline with light details. More important was Trump’s optimism that China wanted to make a deal ahead of talks between the world’s two biggest economies over the weekend.
Earnings season provided investors with an added reason for optimism, with composite first-quarter growth increasing to 13.4% from 12.8% the week earlier. Interestingly, the percentage of companies issuing negative guidance for the next quarter is in line with historical averages, despite the tariff headwinds.
For the week, the S&P 500 fell 0.5%, the Nasdaq Composite slipped 0.3%, while the Russell 2000 inched fractionally higher. Advancing issues outnumbered decliners by a factor of 1.5-1, with Industrial trading the best and Health Care the worst. The Dollar remained steady, Gold set new record highs, and Crude Oil bounced 5% from its recent lows. The yield on the 10-year Treasury moved 5 basis points higher to 4.37%, which is exactly in the middle of its range for 2025.
This Week
Global equities traded higher on Monday morning following the weekend summit in Switzerland between U.S. and China officials, which both parties characterized as being productive. Most significantly, tariffs were slashed with China tariffs falling from 145% to 30% and US tariffs from 125% to 10%, for 90 days.
Outside of the trade talks, inflation and consumer sentiment will be in focus, with Wednesday’s BLS April CPI reading and Friday’s University of Michigan May survey. Economists forecast a 2.4% year-over-year increase in CPI for April, matching the March data. The Consumer sentiment survey follows April’s 52.2 reading, which was the lowest since July 2022 and included the highest year-ahead inflation expectations since 1981.
On the Chicago Sports Scene, the Cubs’ lead in the NL Central has shrunk to just one game over the St. Louis Cardinals with 123 games to go.
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