Markets End Week Mixed Amid Fed Uncertainty and Middle East Tensions

Stocks closed the week with mixed results as investors weighed the escalating tensions in the Middle East against the likelihood of the Federal Reserve cutting interest rates amid an apparent disagreement between Federal Reserve governors. The Dow, the NASDAQ and the Russell 2000 closed the week higher, while the S&P 500 and the Global Dow ended the week in the red. Information Technology and Energy were the only market sectors to finish the week higher. Health Care fell by more than 2.5%. Crude oil prices rose for the third straight week as heightened tensions between Iran and Israel threatened supply disruptions, although Iran continued to export crude oil, reaching its highest level in five weeks. Gold prices marked their first decline in the last three weeks. Long-term bond prices climbed on increased demand, pulling yields lower.

FOMC Holds Rates Steady, Signals Two Cuts by Year-End

The Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate at 4.25%-4.50% following its meeting last week. In reaching its decision, the Committee noted that economic activity has continued to expand at a solid pace, although swings in net exports have affected the data. The unemployment rate remained low, and labor market conditions continued to be solid, while inflation was somewhat elevated. The FOMC observed that uncertainty about the economic outlook had diminished but remained prevalent. The Committee’s summary of economic conditions projects two rate cuts of 25 basis points each by the end of 2025. The FOMC next meets on July 30.

Eye on the Week Ahead

This week is loaded with important, potentially market-moving economic data. The latest data on sales of new and existing homes is available at the beginning of the week. The final estimate of gross domestic product for the first quarter is released midweek. The week ends with the release of the latest data covering personal income, consumer spending and consumer prices.