Equity Markets Closed Lower Last Week
Stocks closed mostly lower last week as investors looked ahead to trade negotiations between the United States and China over the weekend. Despite the announcement of a trade deal between the United States and the United Kingdom, investors remained unsure of the extent of that deal and, more particularly, whether any meaningful progress would be made with China. As has been the case over the last several weeks, the stock market was marked by volatility. Stocks began last week closing lower as President Trump threatened new tariffs, including a levy on foreign films. Crude oil prices dropped to their lowest level since the beginning of 2021 as OPEC+ agreed to increase production, raising fears of a global supply surplus. Wall Street saw a minimal reversal last Wednesday after the Federal Reserve decided to keep interest rates at their present level. Thereafter, stocks moved up and down for the remainder of the week. Among the market sectors, consumer discretionary, industrials and financials performed well, while health care, consumer staples and communication services underperformed.
Federal Reserve Leaves Rates Unchanged
As expected, the Federal Open Market Committee (FOMC) left the federal funds rate at its current range of 4.25%-4.50% following its meeting last week. While noting that economic activity has expanded at a solid pace and the unemployment rate has stabilized, the Committee warned that the risks of higher unemployment and higher inflation have risen. Furthermore, the FOMC statement indicated that uncertainty about the economic outlook has increased. The Committee next meets in mid-June. Fed Chair Jerome Powell spoke after the meeting and ultimately suggested that the best course of action for the Committee is to wait for further clarity relative to the impact of the tariff policy on the economy and inflation.
Eye on the Week Ahead
Inflation data for April is available this week, with the release of several important reports. Both the Consumer Price Index (CPI) and the Producer Price Index (PPI) are out this week. In March, the CPI fell 0.1%, while the PPI dropped 0.4%. It will be interesting to see if tariffs have any impact on those readings for April.