Investors weighed the economic implications of Donald Trump’s tariff policy and the Federal Reserve’s outlook as they climbed US stock prices on Wednesday.
According to expectations, the Federal Reserve kept its benchmark rate at 4.25%-4.50% and forecast two quarter-point rates cuts in later this year.
Policymakers were divided over what to do, reflecting the uncertainty about the impact on the economy of the trade tensions, and the inflation trend.
In addition, the Fed slowed down the rate of its withdrawal to address liquidity issues amid the ongoing debates about the US Government’s borrowing limits.
Economic projections by the central bank point to a slower rate of growth and persistent pressures on inflation.
Matthias Scheiber is the head of Allspring Global Investments’ multi-asset solution team in London. He said that the Fed took a “wait and see” approach to rates, given the growing concerns about tariffs.
The interest rate market expects that the Fed will reduce rates by 3.75% in 2025. A lot will depend on how the inflation-versus-growth trade-off develops–growth may continue weakening, and the Fed may need to cut rates more forcefully than expected,” he added.
Dow Jones, S&P500, Nasdaq composite all gain
Stocks rose sharply after the Fed decision.
The Dow Jones Industrial Average increased by 228.44 or 0.55% to 41,808.20. S&P 500 rose 46.76, or 0.8%, to 5,660.52. Nasdaq Composite gained 213.23, or 1.12%, and closed at 17,715.71.
Investors saw the Fed guidance as being largely consistent with their expectations despite persistent concerns over inflation and economic expansion.
LSEG data shows that traders now expect a 62.2% probability of a minimum 25 basis point cut in the rate for June.
After hovering around 4.32% prior to the Fed announcement, the yield on US 10-year Treasury notes has fallen slightly.
Why did the stock market rise if expectations were met?
Analysts have suggested that the markets were cautious before the announcement due to fears about a Fed with a more aggressive stance.
Emily Roland, John Hancock Investment Management’s co-chief investment strategy, said, “There are hints of stagflation here.” The Fed is revising their growth estimates down and modestly increasing their inflation expectations.
Markets rallied despite the widely expected decision. This was partly due to the relief of not hearing a stronger message from the Fed on the issue.
There were whispers that the Fed could remove one of its projected reductions due to concerns about inflation. The fact that the Fed did not take a more aggressive stance reassured the investors, even though it was expected.
Silver extends losses
After the Federal Reserve kept interest rates at 4.25-4.5%, silver continued to lose value. It now hovers around $33.60 an ounce.
Silver is still near a 5-month high despite the economic uncertainties caused by President Trump’s fiscal and tariff policies. Trade tensions are also escalating.
Rent rates are increasing due to the shrinking silver stockpiles in London and elsewhere, while shipping of silver to America is on the rise.
The price gap has increased across all key commodities, and spot silver is up 17% in this year.
Meanwhile, physical silver transfers–especially from Canada and Mexico–face increasing pressure from tariffs, tightening supply further. Fears of a “silver crunch” are growing, and could affect trade for many months.
Boeing shares jump
Boeing stock rose by 6% Wednesday after CFO Brian West announced that cash consumption was decreasing and that production had improved.
West’s positive outlook on the company, which has seen its shares fall by over 32 percent in just one year, was a welcome counterpoint.
He downplayed the immediate impact of President Donald Trump’s tariffs, but cautioned that the final effect would be dependent on how long the international trade policies will remain uncertain.
West told a Bank of America Investor Conference that he thought the start of this year was good.
Turkish Stock ETF drops after Erdogan’s rival’s arrest
The exchange-traded funds (ETFs) which track Turkish stocks suffered a steep decline Wednesday after the arrest of Ekrem Immamoglu, President Recep T. Tayyip Erdogan’s political rival.
The iShares MSCI Turkey ETF has experienced a major decline with the shares dropping 11.4%.
The ETF is on course to suffer its biggest loss since December 17th, 2021 when it fell by 14%.
Williams-Sonoma Slips
Williams-Sonoma stock fell during morning trading Wednesday after the company released its disappointing guidance for next year.
The stock price was 5.9% lower than the last close at the time this article was written.
Williams-Sonoma shares fell by 11% at one time after it forecasted that net revenues could decline for its upcoming fiscal period ending January 2026.
This company expects its revenue to remain the same or even decrease up to 1.5% from the year before. They attribute this to the fact that the current fiscal year is 52 weeks long, rather than 53 as in the year prior.
A total of $49 Million in adjustments to the company’s accounting was due to incorrectly reported freight costs in prior years.
The ICD first published the article US Stocks Climb as Fed Keeps Rates Stable, Dow Jones S&P500, Nasdaq composite all Gain appeared.
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