Stock Markets Gallop Forward After Fed's Rate Hold and AI Chip Adjustments
Stock markets in the U.S. show a rise following the Federal Reserve's decision.
In an unexpected twist, the US stock exchanges celebrated as the Fed stood its ground in the face of pressure from President Trump, maintaining the key interest rate. This decision was followed by the US government's announcement to replace a controversial AI chip export regulation with a more straightforward one, providing a boost to Wall Street.
The Dow Jones Index gleefully closed 0.7% higher at a whopping 41,113 points, the Nasdaq marked a 0.3% advance to 17,738 points, and the S&P 500 ticked 0.4% upward to 5,631 points.
Earlier, stock prices took a dive when Trump declared he wasn't ready to pull back on 145% tariffs against China. However, the central bank, as expected, left interest rates unchanged, highlighting increased risks of inflation and higher unemployment. Fed Chairman Jerome Powell reiterated that the Fed couldn't care less about White House interference, stating, "We ain't in a rush!"
The Fed remains cautious about the impact of the trade conflict on the US economy before even considering a possible interest rate cut. Trump, of course, hasn't heard that bit and is still barking for rate cuts like a frantic puppy. In the long run, the Fed's actions could mean either rate cuts or maintaining the current level—all depending on the economy's development.
As Trump continues to throw a tantrum, the Fed aims to gather clarity on the trade conflict before making any moves. Economist Ellen Hazen from F.L. Putnam Investment Management sums it up: "The Fed is basically telling the White House, 'Your recent stunts have made the economic landscape all tangled up. The risk of higher unemployment has hiked up, and the risk of inflation is sniffing around too, pal. Ain't explicitly blaming tariffs, but, hey! Who do you think is causing all that ruckus?'"
Now, let's shift gears as traders eye the upcoming negotiations between the economic giants—the US and China—this weekend in Switzerland. Treasury Secretary Scott Bessent, Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng are set to sit down at the negotiation table—but don't expect a lovely trade agreement to be on the menu. According to market experts, it's more like a marathon rather than a sprint.
China, in anticipation of lengthy negotiations with the US, is taking measures to support its domestic economy. The Chinese central bank is pumping liquidity into the banking system by lowering interest rates and adopting other monetary easing measures to spur economic growth.
Diet WW International Plummets After Insolvency Announcement
On an entirely different note, shares of WW International tumbled a staggering 43% following bankruptcy proceedings. This diet company, once known as Weight Watchers, is facing tough times. A rumor that Apple might be eyeing a new partnership with AI-driven search engines, if true, nudged Google parent Alphabet to experience a 7.3% dip.
Coty, the US cosmetics company, also saw its shares slip by 11.6% following a disappointing profit warning from the management. "Gotta tell ya, it's just damn frustrating. Management was so sunshine-y about growth sustainability not long ago," grumbled an analyst from JP Morgan.
On a brighter note, Walt Disney shares bloomed 10.8% as the entertainment giant enjoyed strong revenue and earnings in the first quarter, fueled by increased subscriber numbers for streaming services Disney+ and Hulu. Both visitor numbers and spending per guest at Disney's theme parks also shot up, despite the rocky economic situation.
The community policy of financial institutions might be reconsidered due to the Fed's decision to maintain the key interest rate, potentially affecting the employment policy of banks and investment firms. The employment policy may change in response to the increased risks of inflation and higher unemployment, as mentioned by Fed Chairman Jerome Powell.
Investors might be interested in monitoring the stock-market performance of companies like WW International, following their recent financial struggles, or those expected to benefit from partnerships with AI-driven companies, such as Google or Apple, in engaging sectors like search engines or diet and fitness apps.
