Stocks Rise as Powell Says Economy Is Holding Up: Markets Wrap

(Bloomberg) — Assurances by Jerome Powell that the economy remains sound and the Federal Reserve won’t be forced into rash action by Donald Trump’s trade war bolstered markets, lifting stocks, bonds and the dollar. Equities were also aided by prospects for looser rules on chip exports.

While warning that risks are growing of higher inflation and slowing growth, Powell calmed investors after the Federal Open Market Committee left interest rates unchanged. The S&P 500 halted a two-day slide, led by chipmakers as Bloomberg News reported that the Trump administration plans to rescind Biden-era curbs for the industry. Swap traders kept betting on at least three Fed reductions in the remainder of 2025.

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With unemployment still low and demand steady, Fed officials have said they are comfortable keeping rates unchanged until they have a better understanding of where the economy is headed. Powell repeated that sentiment Wednesday, adding the cost to waiting is fairly low.

“Powell reiterated several times that the Fed wasn’t in a hurry to adjust the stance of monetary policy given the strength of the economy, which puts the Fed in a position to wait for greater clarity and see how conditions evolve before cutting rates,” said Josh Jamner at ClearBridge Investments.

Price action Wednesday was especially muted when compared April 16, when stocks and the dollar tumbled after Powell first mentioned the growing tension between the Fed’s dual mandate of controlling price pressures and bolstering employment. His comments then, coming amid a violent stretch in markets, were taken by traders as a vow to prioritize the fight against inflation even if it proved costly for investors.

The S&P 500 rose 0.4%. The Nasdaq 100 added 0.4%. The Dow Jones Industrial Average gained 0.7%. A gauge of chipmakers jumped 1.7%. Walt Disney Co. surged 11% on a bullish outlook. Alphabet Inc. sank 7.5% as Apple Inc. said it’s “actively looking at” revamping the Safari browser on its devices to focus on AI-powered search engines.

The yield on 10-year Treasuries declined three basis points to 4.27%. The Bloomberg Dollar Spot Index rose 0.5%.

Market turbulence has calmed significantly since the first weeks of April, partly thanks to Trump’s trade concessions but also owing to a string of economic reports that gave confidence to bulls. Friday’s jobs report, which showed unemployment held steady at 4.2%, followed readings on the services economy and inflation that also offered few recessionary signals. 

How long the good news will last as Trump’s trade policies play out is the biggest question confronting central bankers.

“The Fed is not really sure where tariffs are going to land, which is important, and when they land they’re not really sure what the consequences are going to be on growth versus inflation,” said William Dudley, the former New York Fed president, on Bloomberg Television. “This is not just about the central scenario, it’s also about risk management. Try not to do the wrong thing so that you can respond effectively as things actually unfold.”

Officials voted unanimously to keep the benchmark federal funds rate in a range of 4.25% to 4.5%, where it has been since December. In a statement, policymakers said they see a growing risk of both higher inflation and rising unemployment.

“The amount of uncertainty around tariffs has tied the Fed’s hands,” said Byron Anderson at Laffer Tengler Investments. “The perceived risks of higher unemployment and inflation may not be obvious to the Fed yet, but damage is being done. President Trump has a narrow window to get deals done before economic data starts trending negative.”

Wall Street Bets

Across Wall Street, expectations for the Fed’s policy path remains diverse, ranging from none to as much as 125 basis points. Several large-bank economists forecast either two or three cuts this year, beginning in July or September.

Traders, meantime, have pared back their wagers to price in a little over 75 basis points of easing in the rest of the year, implying three cuts — compared to four seen just a week ago. The Fed had forecast two rate cuts in 2025 in their latest projections from March.

“Despite the lack of new guidance by the FOMC today, we are revising our forecast for monetary policy,” said Oscar Munoz and Gennadiy Goldberg at TD Securities. “While we maintain our view for the path of rate cuts to end the cycle at 2.50%, we are now shifting the start back to July. We acknowledge significant risks to this view as policy uncertainty remains high and government decisions fluid.

At Pacific Investment Management Co., Tiffany Wilding says her baseline view is the Fed likely will begin cutting rates in September and continue into the next year as she expects the unemployment rate to rise and longer-term inflation expectations to remain relatively well anchored.

“Even though we heard some hawkish undertones today, we are comfortable looking for our first cut in September,” said Michael Feroli at JPMorgan Chase & Co. “While the Fed is, and should be, focused on the fragility of inflation expectations, we expect that by late summer, labor-market weakness will prompt a policy response.”

Corporate Highlights:

• Arm Holdings Plc gave a lackluster sales forecast for the current period, saying that the timing of new licensing agreements has made the chip company cautious about its predictions.
• Carvana Co. doubled its profits as consumers have gone on a buying spree of new and used cars to avoid higher costs due to Trump’s tariffs.
• AppLovin Corp. agreed to sell its video-games unit to London-based Tripledot Studios to focus on its advertising technology business.
• Uber Technologies Inc. reported weaker-than-expected quarterly gross bookings, citing lower US inbound travel that’s led to slower gains in its rideshare business.
• CrowdStrike Holdings Inc. is cutting about 500 jobs, representing about 5% of its global workforce, as it works toward a goal of generating $10 billion in annual recurring revenue.
• The European Union will propose tariffs on Boeing Co. aircraft and US-made cars if talks with President Donald Trump’s administration fail to de-escalate a brewing trade conflict, according to people familiar with the deliberations.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.4% as of 4 p.m. New York time
• The Nasdaq 100 rose 0.4%
• The Dow Jones Industrial Average rose 0.7%
• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.5%
• The euro fell 0.6% to $1.1306
• The British pound fell 0.5% to $1.3296
• The Japanese yen fell 1% to 143.81 per dollar

Cryptocurrencies

• Bitcoin rose 1.6% to $96,184.15
• Ether rose 1.2% to $1,796.47

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.27%
• Germany’s 10-year yield declined seven basis points to 2.47%
• Britain’s 10-year yield declined five basis points to 4.46%

Commodities

• West Texas Intermediate crude fell 1.7% to $58.09 a barrel
• Spot gold fell 1.8% to $3,371.35 an ounce

–With assistance from Vildana Hajric and Isabelle Lee.

©2025 Bloomberg L.P.