US stock futures dribble higher as Wall Street grapples with the Fed’s statement
U.S. equities closed marginally down after rising on Wednesday after the Federal Reserve predicted two more rate drops this year amid fears that tariffs would increase inflation. The Fed kept interest rates constant, as expected, but its rate forecast soothed investors and consumers who have battled with rising interest rates over the last year. Lower interest rates make borrowing money to buy goods or invest more affordable, increasing economic activity.
Many analysts reduced or canceled their projections for rate reduction early this year, as inflation appeared to be entrenched at high levels and tariffs were expected to raise prices even higher. However, Federal Reserve Chair Jerome Powell said on Wednesday that the possible impact of tariffs on inflation was expected to be short-lived or temporary.
‘Transitory’ is rumored to be returned. Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, said in a note that the market reaction indicates that investors are prepared to accept that tariffs and other measures will not cause long-term inflationary pressures and that the Fed can maintain control. The broad S&P 500 index was down 0.22%, or 12.41 points, to 5,662.88; the blue-chip Dow dropped 0.03%, or 11.43 points, to 41,953.20; and the tech-heavy Nasdaq fell 0.33%, or 59.16 points, to 17,691.63. The S&P 500 briefly entered a correction zone, defined as being at least 10% below a record high, but has since remained outside of it. Some analysts see chances to purchase now if buyers can endure the volatility that is certain to persist.
“We probably haven’t seen the end of volatility,” said Daniel Skelly, who leads Morgan Stanley’s wealth management market research and strategy unit. “Policy uncertainty has not subsided, and the market remains vulnerable to attitude fluctuations. With the S&P 500 still hovering around correction territory, we see attractive possibilities in quality firms, particularly for investors looking to average their way into positions.” The benchmark 10-year Treasury yield fell to 4.237% as investors welcomed the Fed’s plans to decrease interest rates again later this year. Treasury prices fluctuate in the opposite way as yields.
Gold finished 0.37% higher, over $3,000, as the yellow metal remains a popular investment choice in volatile and unpredictable markets. The Fed smothered tariff news this week, but it still lingers. A senior official said Thursday that the European Union may postpone its retaliatory tariffs against the United States until mid-April to give it more time to negotiate with the Trump administration. Last week, The EU said it would impose up to 50% tariffs on various items in retaliation to US levies on global steel and aluminum.
President Donald Trump has repeated his plans to impose retaliatory tariffs on April 2. A tariff exemption on some Canadian and Mexican products also expires on April 2. On Thursday morning, investors had to weigh tariff fears against positive economic data. The Philadelphia Federal Reserve’s manufacturing index decreased this month from February, although not as much as experts had expected. The data also indicated that firms’ hiring plans had reached their most excellent level in October 2022.
Weekly initial unemployment claims increased, although less than experts predicted. “Extremely high levels of policy uncertainty don’t seem to be putting a dent in the labor market,” writes Oren Klachkin, an economist at Nationwide Financial Markets. “Overall, the broad labor market still looks healthy.” Existing house sales increased 4.2% last month, up from January and much above the average prediction of analysts polled by the Wall Street Journal of a 3.2% fall.
