Tech Earnings Drive Further Equity Market Gains

Stocks moved generally higher last week, largely driven by solid corporate earnings from some big tech firms. The S&P 500 and the NASDAQ each reached record highs during the week, extending a significant rally. The push higher was moderated somewhat by the Federal Reserve’s cautious stance on future rate cuts. Despite a lack of updated economic information, the Fed identified concerns about the potential for a weakening job market and stubbornly elevated inflation rates. While trade tensions between the U.S. and China were tempered following a meeting between President Trump and Chinese leader Xi Jinping, analysts cautioned that underlying issues still had not been resolved. Following last week’s interest rate cut, U.S. Treasury yields rose sharply, extending a three-session rally that pushed the 10-year Treasury yield to a three-week high. Despite an early-week rally, crude oil prices dipped lower last week, primarily due to concerns of global oversupply and increased production.

Fed Cut Interest Rates to Lowest Level Since 2022

The Federal Open Market Committee lowered the federal funds rate by 25 basis points to 3.75%-4.00% following its meeting last week. This marks the lowest range for the federal funds rate since 2022. The decision was based on a 10-2 vote, with Stephen I. Miran preferring to lower the target range for the federal funds rate by 50 basis points, while Jeffrey R. Schmid voted for no change to the target range for the federal funds rate. In seeking to achieve its mandate of maximum employment and inflation at 2.0% over the longer run, the Committee based its rate cut on rising downside risks to employment and elevated inflation.

Eye on the Week Ahead

It will be quiet in terms of economic data available this week due to the government shutdown.