The Fed’s decision leaves the federal funds rate at 3.6%, following three rate cuts in 2024, according to central bank projections. Policymakers maintained expectations for at least one additional rate reduction this year, but Powell emphasized that any move would depend on sustained progress in bringing inflation down toward the 2% target.

The policy stance comes amid rising energy costs linked to global tensions and signs of softening in U.S. labor markets, complicating the Fed’s dual mandate of price stability and maximum employment.

Inflation Pressures and Policy Uncertainty

Powell underscored the uncertain economic impact of the ongoing Iran-related conflict, particularly on energy markets. “Nobody knows,” he said, referring to potential effects on inflation and growth.

The Fed remains cautious as inflation, measured by its preferred index, stood at 2.8% in January, up from 2.3% a year earlier and still above the central bank’s target, according to data cited in regulatory filings and central bank releases.

Market analysts note that policymakers are balancing the risk of persistent inflation against weakening labor indicators. “They do not want to continue to miss” the inflation target, said Nathan Sheets, chief economist at Citi, a former Fed economist, as cited by market commentary.

Economic Data Reflects Mixed Signals

Recent economic indicators highlight the challenge facing policymakers. The U.S. economy has experienced both persistent inflationary pressures and signs of labor market softness, with employers shedding 92,000 jobs in February following gains in January, according to government data.

The unemployment rate edged up to 4.4% from 4.3%, suggesting a gradual cooling in hiring conditions. Meanwhile, consumer prices are expected to rise further in the short term due to higher fuel costs, with gasoline prices reaching an average of $3.84 per gallon, according to AAA data.

Fed officials indicated that such supply-driven price increases may prove temporary if geopolitical disruptions ease, allowing inflation to decline later in the year without requiring additional tightening.

Market Reaction and Investor Sentiment

Financial markets reacted negatively to the Fed’s cautious tone, with the S&P 500 falling 1.4% on the day, reflecting investor concerns over prolonged high interest rates and weaker growth prospects.

Market data compiled by major financial outlets indicate that equity investors had anticipated clearer signals on rate cuts, but Powell’s comments suggested a more data-dependent and potentially delayed easing cycle.

Tim Duy, chief economist at SGH Macro, said the Fed’s updated projections appeared “stale,” as policymakers had not fully incorporated the potential economic effects of the Iran conflict.

Leadership and Governance Context

Powell also addressed questions regarding his tenure, stating he has “no intention” of leaving the Fed while a Justice Department investigation into his congressional testimony remains unresolved.

A federal judge recently dismissed subpoenas tied to the investigation, though U.S. Attorney Jeannine Pirro has indicated plans to appeal. Powell’s current term as chair is set to expire in May, with President Donald Trump nominating former Fed official Kevin Warsh as a potential successor.

Even after the transition, Powell could remain on the Federal Reserve Board until his term ends in 2028, though he has not made a final decision.

Outlook and Policy Direction

The Fed’s updated projections slightly raised inflation expectations for 2025 to 2.7%, while also modestly increasing growth forecasts and maintaining an unemployment outlook of 4.4%, according to the central bank’s quarterly summary.

Officials continue to monitor both core and headline inflation trends, with energy price volatility expected to temporarily lift overall price levels. However, policymakers reiterated that sustained disinflation remains a prerequisite for additional rate cuts.

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Published: October 13, 2025, 22:45 EDT

Inflation Eases Slightly, but Prices Remain Elevated for Many Americans

U.S. President Donald Trump has declared victory over inflation, touting falling grocery and mortgage costs, even as government data shows prices remain stubbornly high for millions of Americans. Despite recent rate cuts by the Federal Reserve, inflation has risen in three of the last four months and remains above the central bank’s 2% target.

At the United Nations General Assembly last month, Trump said, “Grocery prices are down, mortgage rates are down, and inflation has been defeated.” But Federal Reserve data and consumer surveys suggest a more complex picture — one that continues to challenge households and policymakers alike.

The Fed’s Balancing Act Between Inflation and Growth

Federal Reserve Chair Jerome Powell, in a high-profile August address, said inflation “has come down a great deal” from its post-pandemic highs, while acknowledging it remains “somewhat elevated.” Shortly afterward, the Fed cut its key interest rate for the first time this year.

The move reflected confidence that the Trump administration’s tariff measures would cause only temporary price increases. Yet, economists warn that if inflation remains persistent, the central bank’s credibility in managing price stability could suffer.

“The Fed is taking a calculated risk,” said Karen Dynan, senior fellow at the Peterson Institute for International Economics. “If inflation doesn’t ease as expected, these rate cuts could be viewed as a mistake in hindsight.”

Tariffs Add Pressure to Consumer Prices

Trump’s recent wave of tariffs has added to inflationary pressures in several sectors. Tariffs on steel, aluminum, and consumer goods have raised production costs, forcing many U.S. companies to pass on expenses to consumers.

In August, consumer prices rose 2.9% year over year, compared with 2.6% a year earlier. The cost of durable goods such as furniture and appliances increased nearly 2%, reversing a decades-long trend of falling prices. Grocery costs climbed 2.7%, while coffee prices surged 21%, driven by a 50% import tax on Brazilian beans and climate-related crop losses.

“These tariffs are hitting everyday goods,” said Jason Furman, a Harvard economist and former adviser to President Barack Obama. “It’s a big gamble to assume these effects will be transitory.”

Businesses Struggle to Absorb Rising Costs

For many manufacturers and retailers, the tariffs are forcing tough choices. Chris Butler, CEO of National Tree Company, said his business plans to raise prices by about 10% this holiday season to offset higher import costs on artificial Christmas trees and decorations.

“About 45% of our products come from China,” Butler said. “We’ve tried to get suppliers to share the cost burden, but we can’t absorb all of it.”

Tariffs as high as 145% earlier this year halted production in China, creating shortages in seasonal products. Although the duties have since been reduced, Butler said factories are still recovering, likely leading to higher prices through the end of the year.

Other companies, such as Campbell Soup Co., report similar pressures. The company’s CEO said in September it would implement “surgical pricing initiatives” to offset tariff-related increases in steel and aluminum costs.

Economists Warn of Risks to Confidence and Stability

While overall inflation has cooled from its 9.1% peak three years ago, many Americans remain frustrated by elevated prices on essentials such as food, housing, and fuel. Economists caution that confidence in the Federal Reserve’s inflation management is vital to preventing further instability.

“If consumers and businesses stop believing inflation will stay low, it becomes self-fulfilling,” Dynan said. “People demand higher wages, companies raise prices, and it snowballs.”

Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, warned that inflation driven by eroding public confidence is harder to control than inflation caused by supply shocks. “The Fed must maintain its credibility,” he said. “Not all inflations are equally costly to fight.”

Mixed Outlook as Fed and White House Diverge

Despite criticism, some officials within the Trump administration and the Fed remain optimistic. Stephen Miran, a Fed governor appointed by Trump, said falling rental prices and reduced immigration will likely cool inflation in coming months by easing demand pressures.

“I’m more sanguine about the inflation outlook than many others,” Miran said.

Still, with new tariffs—including 100% duties on pharmaceuticals, 50% on cabinetry, and 25% on heavy trucks—looming over global supply chains, analysts say the administration’s optimism could face fresh tests before the year’s end.

The next inflation report, delayed by the ongoing government shutdown, will offer the clearest indication yet of whether inflation is finally under control—or still simmering beneath the surface.

Source: AP News – Trump says inflation is ‘defeated’ and the Fed has cut rates, yet prices remain too high for many

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Published: September 24, 2025, 20:00 EDT

U.S. stocks edged lower on Tuesday, ending a streak of record highs as investors weighed comments from Federal Reserve Chair Jerome Powell on valuations and inflation. Tech shares, particularly Nvidia, led the decline, while gold prices reached another milestone amid expectations of further interest rate cuts.

Market Pullback After Record Highs

Wall Street paused on Tuesday following three straight sessions of record-breaking gains. The S&P 500 slipped 0.6%, the Dow Jones Industrial Average fell 88 points, or 0.2%, and the Nasdaq composite declined 0.9%.

The pullback follows a strong rally since April, when stocks rebounded sharply from earlier losses. While optimism over artificial intelligence, corporate earnings, and interest rate expectations has fueled the surge, some analysts caution the market may have climbed too quickly. Even Federal Reserve Chair Jerome Powell noted that stock valuations appear “fairly highly valued.”

Technology Giants Lead the Decline

Technology stocks, which have been at the heart of Wall Street’s rally, were among the biggest drags. Nvidia, often viewed as a bellwether for AI-related investments, fell 2.8% after paring gains from the previous day. The company had announced a high-profile partnership with OpenAI to expand data center infrastructure, sparking heavy buying before the pullback.

Amazon dropped 3%, and Microsoft lost 1%, adding pressure to the Nasdaq. These declines reflect broader profit-taking among large-cap technology companies that have powered much of the market’s upward momentum this year.

Boeing Provides Support Amid Weakness

Not all corporate stories weighed negatively on the market. Boeing rose 2% after announcing that Uzbekistan Airways agreed to purchase 14 Dreamliner aircraft, with an option for eight more. The order bolstered confidence in Boeing’s recovery efforts as it works to rebuild after years of setbacks and safety concerns.

Meanwhile, healthcare firm Kenvue gained 1.6% after rebounding from losses the day before. The drop had followed speculation that former President Donald Trump might link its Tylenol product to autism risk during public remarks. While Trump cautioned pregnant women about taking the medication, he did not reference significant new research, and the company has strongly disputed any connection between Tylenol and autism.

Market Numbers at a Glance

By the close of trading, the S&P 500 dropped 36.83 points to finish at 6,656.92. The Dow Jones Industrial Average slipped 88.76 points to 46,292.78, and the Nasdaq composite shed 215.50 points to 22,573.47.

The pullback comes after weeks of near-uninterrupted gains, suggesting that investors may be recalibrating expectations ahead of key economic data releases later in the week.

Gold Extends Record-Breaking Rally

Gold prices continued their extraordinary climb, briefly surpassing $3,800 per ounce—a new record high. The precious metal has risen nearly 45% this year, outpacing even the surging stock market.

Several factors have contributed to the rally: expectations of interest rate cuts from the Federal Reserve, concerns about persistent inflation, and broader anxiety about rising government debt levels. Investors often view gold as a safe-haven asset during periods of economic and financial uncertainty.

Fed Balances Inflation and Jobs

Powell acknowledged on Tuesday that the central bank is in a difficult position, with inflation still above the Fed’s 2% target even as signs of labor market weakness emerge. These were his first public remarks since the Fed cut its benchmark interest rate last week—the first reduction of the year.

While officials have indicated more rate cuts may follow later in 2025 and into 2026, they remain cautious. Lower rates can stimulate growth but also risk fueling inflation further, a balance the Fed is closely monitoring.

Economists are watching Friday’s release of the Fed’s preferred inflation gauge. Forecasts suggest household prices rose slightly faster last month, underscoring ongoing challenges in achieving price stability.

Mixed Signals on Business Activity

Economic data released Tuesday showed that U.S. businesses remain in expansion mode, though at a slower pace. According to S&P Global, tariffs have increased input costs for many companies. However, weaker consumer demand and heightened competition have made it difficult for firms to fully pass those costs on to customers.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the findings indicate inflationary pressures may ease somewhat for households, but not enough to bring inflation down to the Fed’s 2% goal in the near term.

Treasury Yields Edge Lower

In the bond market, Treasury yields slipped as investors sought safe assets. The yield on the 10-year Treasury note declined to 4.11% from 4.15% the previous session. Lower yields suggest some investor caution, reflecting both economic uncertainties and anticipation of Fed policy moves.

Global Markets See Modest Moves

Overseas markets presented a mixed picture. France’s CAC 40 index rose 0.5%, supported by strength in European industrials, while Hong Kong’s Hang Seng fell 0.7% amid concerns over slowing Chinese economic growth. Japan’s markets were closed for a national holiday, contributing to lighter trading volumes across Asia.

The modest international activity underscored the global nature of current market dynamics, where central bank policy shifts, trade measures, and geopolitical tensions influence investor sentiment across continents.

Looking Ahead

With stocks at elevated levels and investors awaiting fresh economic data, analysts expect continued volatility. The Fed’s path on interest rates, inflation readings, and corporate earnings guidance are likely to drive market direction in the weeks ahead.

For now, Wall Street’s retreat appears less a reversal than a pause, as investors weigh whether the rally has run ahead of fundamentals—or if optimism about growth, AI, and lower rates can sustain further gains.

Source: AP News – US stocks slip as Wall Street’s relentless rally takes a pause

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Published Time: 08-18-2025, 14:30

Wall Street began the week largely steady, with U.S. stocks hovering near record highs as investors prepared for a critical week of Federal Reserve commentary and earnings from some of the nation’s largest retailers.

The S&P 500 opened flat on Monday after snapping a three-day streak of all-time highs last week. The Dow Jones Industrial Average showed little movement, while the Nasdaq Composite edged 0.1% higher in early trading, according to market data reported by the Associated Press.

Novo Nordisk and Soho House Drive Early Gains

Shares of Novo Nordisk, the Danish pharmaceutical company, rose 5.3% after U.S. regulators approved its Wegovy drug for use in treating a liver disease linked to obesity. The decision is expected to expand the company’s reach in the U.S. healthcare market, adding to its momentum as a leading player in weight management therapies.

Meanwhile, Soho House, a global private membership club, surged 16.2% after announcing that an investor group led by hotel operator MCR would acquire its shares at $9 in cash. The deal sparked optimism about renewed investment interest in lifestyle and hospitality brands.

Retail Giants Prepare for Earnings Reports

This week, Wall Street is closely watching the financial results of top U.S. retailers, which could provide insight into consumer spending trends amid shifting economic conditions.

• Home Depot, set to report on Tuesday, slipped 0.7% in early trading.
• Target gained 1.7% ahead of Wednesday’s earnings release.
• Walmart added 0.2% as it prepared to unveil results on Thursday.

Other major retailers, including Estee Lauder and Ross Stores, are also on the calendar. Analysts say their reports will highlight how American households are managing amid a cooling labor market and uneven wage growth.

Concentration of Market Gains Raises Caution

Market strategists note that a handful of dominant U.S. companies continue to drive stock market growth, particularly in sectors linked to artificial intelligence investment.

Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, warned that this concentration could increase risks. “The danger is that investors could look at how much the broad S&P 500 has surged and extrapolate the success of the few to the gains of the many,” she said.

If economic growth slows and inflation remains elevated, smaller companies may struggle even as large-cap technology firms continue to thrive.

Attention Turns to Jackson Hole Fed Meeting

Investors are also focused on the upcoming Jackson Hole Economic Symposium in Wyoming, where Federal Reserve Chair Jerome Powell is scheduled to speak on Friday. His remarks are expected to provide fresh signals on the Fed’s interest rate outlook.

Last month, Powell suggested caution on cutting rates too quickly, citing concerns over inflation risks, including those tied to tariffs introduced by former President Donald Trump. However, recent labor market data showing weaker job growth has shifted attention toward potential economic slowdown.

The Fed faces the ongoing challenge of balancing its dual mandate: supporting employment while keeping inflation under control. Economists note that lowering interest rates can stimulate borrowing and investment but risks reigniting price pressures.

Inflation Data Remains Mixed

Recent inflation reports have delivered conflicting signals, adding uncertainty to the Fed’s path forward. Despite this, traders remain confident that the central bank could reduce its benchmark interest rate for the first time this year at the September meeting.

Treasury yields have eased in anticipation. On Monday, the yield on the 10-year Treasury note slipped to 4.31%, down slightly from 4.33% late Friday.

Global Markets React to Geopolitical Developments

International markets showed mixed performance at the start of the week.

• In Europe, indexes dipped as investors assessed the outcome of former President Trump’s meeting with Russian President Vladimir Putin, which ended without a clear resolution on the war in Ukraine. Later in the day, Trump is scheduled to meet with Ukrainian President Volodymyr Zelenskyy and other European leaders.
• In Asia, markets were divided. Japan’s Nikkei 225 rose 0.8%, while South Korea’s Kospi fell 1.5%, reflecting regional economic pressures.

Outlook: Investors Weigh Risk and Opportunity

With Wall Street near record highs, analysts say the week ahead could be pivotal. Retail earnings will shed light on consumer resilience, while Powell’s Jackson Hole remarks may clarify the Fed’s stance on interest rates amid mixed economic signals.

For now, investors are treading cautiously, balancing optimism about strong corporate earnings with concern over market concentration and global uncertainty.

Source: AP News – Wall Street holds near its record heights

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Published Time: 08-15-2025, 16:00

As the Federal Reserve prepares for its annual Jackson Hole conference next week and a crucial September policy meeting, officials remain divided on the most pressing challenge for the U.S. economy: persistent inflation or slowing job growth.

The Fed’s upcoming decisions will be closely watched by investors and economists, as signals from policymakers will influence borrowing costs, financial markets, and the broader economy.

Weaker Job Gains Fuel Debate Over Rate Cuts

Recent labor data have complicated the Fed’s path forward. Weak job growth since April has prompted some officials to support a potential cut in the central bank’s key interest rate as soon as September. However, other members continue to view inflation as a significant concern that may warrant maintaining current rates.

“The slowdown in aggregate demand and soft labor market indicators suggest we should focus on employment risks,” said Michelle Bowman, a member of the Fed’s Board of Governors. Bowman emphasized that underlying inflation is trending toward the Fed’s 2% target, allowing some flexibility to prioritize job creation.

July’s monthly jobs report highlighted the challenge: average monthly job gains for May, June, and July fell to 35,000—a sharp drop from 123,000 a year ago—raising concerns about economic momentum.

Inflation Remains a Core Concern

Despite weaker hiring, many Fed officials caution that inflation is not fully contained. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, noted that while job growth has slowed, the unemployment rate remains low at 4.2%, signaling a resilient labor market.

“The job slowdown may partly reflect reduced immigration rather than a weakening economy,” Goolsbee told reporters. He also pointed to rising prices in services such as dental care and air travel, which are not directly affected by tariffs, as a warning sign that inflation could remain elevated.

Tariffs and the Uncertain Inflation Outlook

Federal Reserve officials continue to debate the impact of tariffs on future inflation. Mary Daly, president of the Fed’s San Francisco branch, suggested that recent trade duties may cause a temporary price increase but are unlikely to trigger long-term inflation pressures.

Conversely, Raphael Bostic, president of the Fed’s Atlanta branch, warned that tariffs could create structural changes if manufacturers shift production from low-cost overseas locations to higher-cost domestic facilities or other countries with higher wages. “This is more than a one-time effect—it fundamentally changes the economy,” Bostic said. He added that with low unemployment, the Fed has the luxury to wait for clearer data before acting.

Market Expectations and Policy Uncertainty

Wall Street investors currently anticipate a rate cut in September, with CME FedWatch futures indicating a 93% probability. This optimism increased after August 1’s jobs report revealed weaker hiring than initially estimated.

However, recent wholesale price data may temper expectations for aggressive cuts. The July wholesale price report showed significant price increases for goods and services before reaching consumers, making a larger half-point reduction in September less likely. Alberto Musalem, president of the Fed’s St. Louis branch, described such a move as “unsupported by the current state of the economy and the outlook.”

Economists also caution that the Fed’s inflation projections may need adjustment. Tim Duy of SGH Macro noted that inflation, excluding volatile food and energy prices, is forecast to reach 3.1% by year-end—already near current levels—making a rate cut more challenging if policymakers anticipate continued price pressures.

Jerome Powell’s Speech Will Be Closely Watched

With uncertainty surrounding both jobs and inflation data, all eyes are on Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole conference. Observers expect Powell’s remarks to provide critical insight into the Fed’s thinking ahead of the September 16-17 meeting.

“If inflation risks materialize or tariffs begin to affect prices more persistently, the Fed may have to reconsider a rate reduction,” Duy said. “There are factors that could push policymakers off the expected path.”

Balancing Dual Mandates

The Federal Reserve is navigating a delicate balance between its dual mandates: promoting maximum employment and stabilizing prices. Some officials prioritize supporting the labor market amid signs of slowing hiring, while others remain cautious to avoid reigniting inflation pressures that could undermine long-term economic stability.

As the Fed approaches its September meeting, investors, policymakers, and businesses will be analyzing each new jobs and inflation report for clues on the central bank’s next move. How the Fed weighs these competing concerns will have significant implications for the U.S. economy and financial markets in the coming months.

Source: AP News – Inflation or jobs: Federal Reserve officials are divided over competing concerns

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Written: July 31, 2025, 15:00 U.S. Eastern Time

Tech stocks led Wall Street higher on Thursday as major companies like Microsoft and Meta Platforms delivered impressive earnings, propelling key indexes toward new records. The surge came even as inflation data and tariff uncertainties continued to weigh on the broader economic outlook.

S&P 500 and Nasdaq move toward new records

Stocks opened strong Thursday morning, extending their upward momentum fueled largely by optimism in the technology sector. As of 11:01 a.m. Eastern Time, the S&P 500 rose 0.2%, coming within range of its record high set earlier in the week. The Nasdaq Composite jumped 0.8%, supported by major tech stock gains, while the Dow Jones Industrial Average remained mostly flat.

The rally was primarily driven by earnings from large-cap tech firms, whose performance and future outlook continue to be shaped by advancements in artificial intelligence (AI).

Meta and Microsoft earnings exceed expectations

Meta Platforms, the parent company of Facebook and Instagram, surged by 11.2% after the company significantly beat Wall Street’s second-quarter expectations on both revenue and profit. Meta’s continued investment in AI technologies is seen as a long-term growth strategy that resonated with investors.

Microsoft shares also rose, up 4.4% on the day, following a strong earnings report. Particularly noteworthy was an encouraging update on Azure, Microsoft’s cloud computing division and a key component of its AI ecosystem. The results underscored the company’s leading role in the ongoing AI-driven transformation across sectors.

The tech momentum is expected to continue as Apple and Amazon prepare to release their earnings after the closing bell. These companies, along with Microsoft and Meta, have been the primary drivers behind the market’s recent rally, driven by growing investor confidence in AI’s future.

Strong earnings reported beyond tech

Outside of the technology sector, other major companies also posted solid earnings that helped sustain the market’s overall performance.

CVS Health rose 3.3% after exceeding Wall Street expectations and raising its full-year guidance. The healthcare giant’s strong quarterly results added further depth to a week already packed with corporate earnings reports across sectors.

Earnings remain a primary focus for investors as companies navigate a complicated macroeconomic environment shaped by inflation, interest rates, and trade policy.

Inflation edges higher, raising policy questions

Economic data released Thursday morning showed inflation ticked up slightly in June. According to the U.S. Commerce Department, the Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation measure, increased by 2.6% compared to June of last year. That’s up from 2.4% in May and slightly higher than economists’ expectations.

Earlier this month, the Consumer Price Index (CPI) also indicated a rise in inflation, reinforcing concerns that price pressures remain sticky despite the Fed’s ongoing efforts to bring inflation closer to its 2% target.

In addition, weekly jobless claims data showed a small uptick in Americans filing for unemployment benefits. While not alarming on its own, it adds complexity to the Fed’s balancing act between supporting employment and controlling inflation.

Fed maintains interest rates amid economic uncertainty

Amid this backdrop, the Federal Reserve chose to leave its benchmark interest rate unchanged for a fifth consecutive meeting. Officials continue to monitor inflation trends carefully before making any decision on rate cuts.

While lower interest rates could support job growth and boost economic activity, the risk of reigniting inflation remains a central concern. Fed Chair Jerome Powell has reiterated that any decision on rates is made collectively by the Federal Open Market Committee (FOMC), despite political pressure.

President Donald Trump has publicly called for rate cuts to stimulate the economy, but the Fed has opted for caution, especially given the volatile economic signals and ongoing trade policy disruptions.

Trade tensions reemerge with tariff threats

Trade policy uncertainty added another layer of market risk this week. On Wednesday, President Trump signed an executive order imposing 50% tariffs on imports from Brazil, citing political motivations tied to the trial of Brazil’s former president Jair Bolsonaro, a known ally.

Trump has also threatened broader tariffs on goods from multiple countries unless new trade agreements are reached by Friday. Negotiations with China appear to have paused escalations for now, and a tentative deal with South Korea has been announced. However, businesses remain on edge as Trump’s trade decisions continue to defy traditional economic strategy.

Major U.S. companies including Ford and Hershey’s have warned in recent weeks that tariffs are affecting both current and projected earnings.

Rate cut expectations cooling ahead of September

Investor expectations for a Fed rate cut in September are fading. According to data from CME Group, traders now see only a 39.2% probability of a rate cut at the next meeting. That’s down from 58.4% a week ago and 75.4% a month earlier.

The shifting sentiment reflects growing doubts about whether inflation will cool enough in the near term to justify a cut, even as some sectors of the economy show signs of softening.

Bond yields ease amid cautious optimism

In the bond market, yields fell slightly. The 10-year U.S. Treasury yield dropped to 4.34%, down from 4.37% on Wednesday. Meanwhile, the 2-year yield declined to 3.92% from 3.94%.

Lower yields suggest that investors remain cautious about future growth, even as equities rally on strong earnings and AI optimism.

Global markets mixed as U.S. tech leads

Overseas markets were mostly mixed on Thursday. Asian stocks were generally flat, while European markets saw modest gains in response to the U.S. tech surge.

As the week progresses, investors will continue to monitor a steady stream of earnings reports, economic data, and policy signals that could influence the trajectory of the market into the second half of the year.

Source: AP News – Rallies for Microsoft and Meta send Wall Street higher

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Stocks edge higher after Powell’s wait-and-see message, as tensions ease in the Middle East

Asian markets posted modest gains Wednesday, following Wall Street’s rally and signs of easing geopolitical tensions in the Middle East. Investors are now shifting their focus to the Federal Reserve and the potential impact of tariffs and oil prices on the global economy.

In testimony to Congress on Tuesday, Federal Reserve Chair Jerome Powell signaled that the Fed is in no rush to cut interest rates — a stance that contrasts sharply with former President Donald Trump’s calls for immediate action.

“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” Powell said before the House Financial Services Committee.

Oil Prices Bounce Back, but Remain Below Pre-Conflict Levels

Oil prices rebounded slightly early Wednesday after tumbling roughly 6% on Tuesday. The drop followed a fragile but holding ceasefire between Israel and Iran, easing fears that the conflict might disrupt global oil supplies.

• U.S. crude rose 1.2% to $65.16 a barrel
• Brent crude added 1.1%, reaching $66.95

Despite the slight uptick, oil remains cheaper than it was before the conflict erupted nearly two weeks ago — good news for consumers and central bankers trying to rein in inflation.

“Easing stress in energy markets is excellent news for everyone who doesn’t want to see higher oil prices translating into accelerating inflation and tighter monetary policy,” said Ipek Ozkardeskaya of Swissquote Bank.

Asian Markets Follow Wall Street’s Lead

Investor confidence seems to be rebounding. After Trump announced the Israel-Iran ceasefire, global markets rallied. On Tuesday, the S&P 500 surged 1.1%, climbing back within 0.8% of its record high from February. The Dow Jones jumped 1.2%, and the Nasdaq added 1.4%.

That momentum carried over to Asian trading early Wednesday:

• Japan’s Nikkei 225: +0.3% to 38,917.08
• Hong Kong’s Hang Seng: +0.9% to 24,386.59
• Shanghai Composite: +0.5% to 3,437.10
• South Korea’s Kospi: +0.2% to 3,110.19
• Australia’s S&P/ASX 200: +0.1% to 8,562.90
• Taiwan’s Taiex: +1.1%
• India’s Sensex: +0.7%
• Thailand’s SET: -0.4%

“The world can now move on to face other difficult choices like tariffs and things like that,” said Frances Lun, CEO of GEO Securities in Hong Kong. “The market is well on its way to rebound and could again reach new levels.”

Fed Remains Cautious Amid Tariff Uncertainty

While the ceasefire and falling oil prices are calming markets, the Federal Reserve is keeping a close eye on another wildcard: tariffs.

The Fed has made it clear that it’s not ready to act until it sees more data on how the recently imposed tariffs — part of Trump’s broader economic strategy — will impact inflation and growth. Tuesday’s consumer confidence report came in weaker than expected, though inflation remains only slightly above the Fed’s 2% target.

Currency Markets

In currency trading:

• The U.S. dollar rose to 145.10 Japanese yen from 144.93 yen
• The euro edged up slightly to $1.1617 from $1.1610

Source: AP News – Asian shares gain as investors shift focus to Federal Reserve, tariffs

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As Trump has raised import taxes, he insists that foreign producers and big retailers like Walmart should bear the burden, not consumers. However, many economists remain skeptical, warning that these tariffs are fueling inflation and will ultimately drive up prices for everyday goods. Walmart itself recently warned that items ranging from bananas to children’s car seats could see significant price hikes.

In a pointed post on his social media platform, Truth Social, Trump called out Walmart, which employs 1.6 million people across the U.S., for trying to shift blame onto tariffs for raising prices.

“Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain,” Trump wrote. “Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!!!”

This message highlights the difficult balancing act many American companies face under Trump’s trade policies — caught between rising costs, worried customers, and the president’s public rebukes. Trump has issued similar warnings to U.S. automakers, demanding they avoid passing tariff-related costs onto consumers despite higher production expenses.

The tariffs have cast a shadow over an otherwise steady U.S. economy. On Friday, the University of Michigan’s consumer sentiment survey hit its second-lowest level on record, with about 75% of participants spontaneously mentioning tariffs as a key concern driving expectations of rising inflation.

Walmart CEO Doug McMillon met with Trump in April to discuss the tariffs, but the administration has pressed ahead with its policies. Meanwhile, companies like Amazon and Apple have also faced challenges from supply chain disruptions tied to the tariffs.

John David Rainey, Walmart’s chief financial officer, recently warned that a $350 car seat imported from China could soon cost shoppers an additional $100 — a 29% increase.

“We’re wired to keep prices low, but there’s a limit to what we can bear, or any retailer for that matter,” Rainey told The Associated Press after Walmart reported strong first-quarter sales.

In a recent move, the administration reduced a steep 145% tariff on some Chinese goods to 30% for 90 days. But Trump has also slapped tariffs as high as 25% on imports from Mexico and Canada over immigration and drug trafficking concerns, straining relations with the country’s two biggest trading partners.

Currently, most countries face a baseline 10% tariff, with Trump promising new trade deals in the coming weeks. He intends to keep tariffs as a steady revenue source, including a deal with the United Kingdom that would largely maintain the 10% rate.

Beyond goods, tariffs also target autos, steel, aluminum, and potentially pharmaceutical drugs, creating uncertainty across the economy. Federal Reserve Chair Jerome Powell has kept interest rates steady, citing the unpredictable impact of tariffs on growth and prices.

On Saturday, Trump once again urged Powell to cut rates — a move that could further boost inflation — while insisting that inflation pressures are fading.

“Too Late Powell, a man legendary for being Too Late, will probably blow it again – But who knows???” Trump posted on Truth Social.

Source: AP News – Trump warns Walmart: Don’t raise prices due to my tariffs but do eat the costs from those taxes

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Inflation up, jobs down? The Fed braces for the possibility of stagflation as Trump’s sweeping tariffs disrupt the economy.

Federal Reserve Chair Jerome Powell delivered his bluntest warning yet on Wednesday, saying that President Donald Trump’s aggressive tariff policies could send the U.S. economy into a tailspin — one the Fed may not be fully equipped to handle.

Speaking at an event hosted by the Economic Club of Chicago, Powell called the tariffs a “very fundamental policy change” with no modern precedent.

“There isn’t a modern experience of how to think about this,” Powell said, noting that the scale of tariff hikes has far exceeded expectations.

Powell outlined a troubling scenario where tariffs could slow economic growth, drive up inflation, and raise unemployment — all at once. That’s a worst-case combination the U.S. hasn’t seen in nearly half a century.

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” he said, referring to the Fed’s mandate to ensure both low inflation and full employment.

Markets didn’t take the news lightly. As Powell spoke:

• The Dow dropped 700 points (1.7%)
• The S&P 500 fell 2.5%
• The Nasdaq sank 3.5%

Trump’s tariffs, either already in place or on the way, include:

• 25% tariffs on steel, aluminum, and autos
• 145% duty on Chinese imports
• 25% tariffs on goods from Mexico and Canada that don’t meet trade terms
• A 10% baseline tariff on all U.S. imports
• Potential new tariffs on semiconductors, pharmaceuticals, copper, and timber

Some exemptions have been granted for electronic goods, but the economic toll is mounting — and the American public is footing part of the bill, Powell noted.

“Unemployment is likely to go up as the economy slows,” Powell said.
“In all likelihood, inflation is likely to go up as well… A portion of the burden of tariffs is going to be paid by the public.”

Despite the warning signs, Powell said the Fed isn’t rushing to make a move. Instead, policymakers are holding off on interest rate changes until the economic picture becomes clearer.

“Waiting for additional data will help inform the path ahead,” said Cleveland Fed President Beth Hammack.

But economists are worried that if Trump’s postponed tariffs — like the ones delayed until July — do take effect, the damage could accelerate quickly.

Many economists fear the country could slide into stagflation, a dreaded mix of slow growth, rising unemployment, and high inflation not seen since the 1970s and 1980s.

“A tariff is like a negative supply shock,” said Chicago Fed President Austan Goolsbee.
“Prices go up while jobs are lost and growth slows — that’s a stagflationary shock.”

Back in the ’80s, then-Fed Chair Paul Volcker responded to stagflation by aggressively raising interest rates, which tamed inflation but also caused a recession. Powell now faces a similar dilemma: fight inflation at the risk of hurting jobs, or vice versa.

“We would consider how far the economy is from each goal, and the different time horizons to close those gaps,” Powell said.
“We understand how painful high inflation or high unemployment can be for families and businesses.”

The Fed’s next steps will hinge on economic indicators — especially consumer sentiment, inflation expectations, and the job market. The University of Michigan’s consumer survey already shows declining confidence in price stability.

While inflation is down from its 2022 peak, it’s still slightly above the Fed’s 2% target, giving policymakers less room to maneuver.

“This is a difficult set of risks for monetary policy to navigate,” Hammack said. “There is a strong case to hold steady and let the data guide us.”

Source: CNN – Fed Chair Powell gives starkest warning yet on potential economic consequences from tariffs

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Key Takeaways:

• The Federal Reserve reduced interest rates by 25 basis points but projected fewer rate cuts in 2025 than previously anticipated.
• U.S. markets faced a sharp sell-off, with major indices experiencing significant losses.
• Investor disappointment stemmed from dashed expectations of aggressive rate reductions in the near future.

Fed’s Decision: A Modest Cut but a Tighter Future

On Wednesday, the U.S. Federal Reserve lowered its interest rate by 25 basis points, setting its target range to 4.25%-4.5%. While this marked a step toward easing monetary policy, the central bank’s updated projections signaled only two rate cuts for 2025—a notable downgrade from the four cuts anticipated in September.

This revised outlook delivered a blow to markets that had hoped for a more aggressive easing trajectory.

Market Reaction: A Sell-Off Frenzy

U.S. markets tumbled in response to the Fed’s announcement:

• Dow Jones Industrial Average: Dropped over 1,000 points (-2.58%), marking its 10th consecutive day of losses.
• S&P 500: Declined 2.95%.
• Nasdaq Composite: Fell 3.56%.

Across the Atlantic, the Stoxx 600 in Europe closed up 0.15% before the Fed’s decision, escaping the U.S. market’s turbulence.

Individual Stock Movements: Tesla and Micron Hit Hard

• Tesla: Shares plummeted 8.3%, their steepest one-day drop since November 2016, as analysts flagged the stock’s disconnect from fundamentals amid broader market weakness.
• Micron: The chipmaker’s stock plunged more than 15% in extended trading. While it exceeded last quarter’s earnings expectations, Micron issued a disappointing revenue forecast of $7.9 billion for the current quarter, well below analysts’ estimates of $8.98 billion.

Why Investors Were Disappointed

The markets’ reaction wasn’t about the Fed’s actual rate cut—it was about the revised dot plot.

Before the Fed meeting, markets widely expected the 25 basis-point reduction, with futures pricing in a 98% probability of the move. Investors had even hoped for another rate cut as soon as January, with an 81.6% chance forecasted.

However, Fed Chair Jerome Powell quashed those expectations.
“With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” Powell said.
“We can therefore be more cautious as we consider further adjustments to our policy rate.”

Following Powell’s comments and the updated projections, the chance of another January rate cut plummeted to just 6.4%.

The Emotional Blow: A Shift in Market Sentiment

This shift in expectations felt like a harsh reality check for investors. The optimism that drove recent market performance crumbled as hopes of aggressive rate cuts gave way to the Fed’s cautious tone.

David Russell, global head of market strategy at TradeStation, summed up the sentiment:
“Good-bye punch bowl. No Christmas cheer from the Fed.”

Bottom Line: The Power of Expectations

Wednesday’s sell-off is a reminder of how markets often move not on present actions, but on expectations for the future. The Fed’s decision to moderate its easing plans, coupled with Powell’s cautious messaging, recalibrated investor sentiment—leading to the dramatic market retreat.

For now, markets will closely watch every word and signal from the Fed, as the balance between cautious optimism and economic reality continues to shape financial markets.

Source

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