Stock market pauses after Fed-linked rally. EU to delay tariffs. Job data look healthy
U.S. stocks ended slightly lower after rallying on Wednesday when the Federal Reserve indicated two more rate cuts this year despite expectations for tariffs to boost inflation.
The Fed left interest rates unchanged, as expected, but its rate outlook reassured investors and consumers who have struggled under high interest rates for the past year. Lower interest rates make borrowing money cheaper to buy things or invest, which boosts economic activity.
Many economists had trimmed or eliminated their forecasts for rate cuts earlier this year after inflation seemed stuck at elevated levels and predicted tariffs would further increase prices. But on Wednesday, Federal Reserve Chair Jerome Powell labeled the potential effect of tariffs on inflation as likely being short-lived or transitory.
″‘Transitory’ is back, or at least that was the insinuation. The market reaction, to me, says that investors are willing to believe that tariffs and other policies won’t create lasting inflationary pressures and that the Fed can stay in control,” said Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, in a note.
The broad S&P 500 index slipped 0.22%, or 12.41 points, to 5,662.88; the blue-chip Dow dipped 0.03%, or 11.43 points, to 41,953.20; and the tech-heavy Nasdaq lost 0.33%, or 59.16 points, to 17,691.63.
The S&P 500 recently dipped briefly into correction territory, defined as at least 10% below a record high, but has since held outside of it. Some strategists see opportunities to buy now, if people can stomach volatility that's sure to continue.
"We probably haven’t seen the end of volatility," said Daniel Skelly, head of Morgan Stanley's wealth management market research & strategy team. "Policy uncertainty hasn’t disappeared, and the market remains sensitive to sentiment shifts. With the S&P 500 still relatively close to correction territory, we do now see compelling opportunities in quality companies, especially for investors looking to average their way into positions."
The benchmark 10-year Treasury yield fell to 4.237% as investors cheered the Fed's intentions to cut rates again later this year. Treasury prices move in the opposite direction of yields.
Gold closed 0.37% higher, holding above the $3,000 level, as the yellow metal remains an investment favorite in volatile and uncertain times.
Tariff news was overshadowed by the Fed this week, but continues to linger. The European Union may delay its retaliatory tariffs against the U.S. until mid-April to allow more time for negotiations with the Trump administration, a senior official said Thursday. The EU said last week it planned tariffs of up to 50% on various products in response to U.S. tariffs on global steel and aluminum.
President Donald Trump has reiterated his plans to enact retaliatory tariffs on April 2. A tariff exemption on select Canadian and Mexican imports also expires April 2.
Investors had to weigh tariff uncertainty against some good economic news on Thursday morning. The Philadelphia Federal Reserve's manufacturing index fell this month from February but not as much as economists had forecasted. The report also showed companies' hiring intentions at the highest level since October 2022.
Weekly initial jobless claims rose but by less than economists' forecasts. “Extremely high levels of policy uncertainty don’t seem to be putting a dent in the labor market,” Nationwide Financial Markets Economist Oren Klachkin wrote in a note. "Overall, the broad labor market still looks healthy."
Existing home sales also jumped 4.2% last month, up from January and much better than the average forecast of economists polled by the Wall Street Journal for a 3.2% decline. "The rebound from January's decline indicates poor weather may have temporarily depressed home buying at the start of the year," Wells Fargo economists said in a note.
But "all told, resales continue to run at a slow pace on account of persistent affordability challenges," they said.
Corporate news
- Beacon Roofing shares rose 1.89% after agreeing to be bought by building-products distributor QXO for approximately $11 billion, including debt.
- Tesla recalled more than 46,000 Cybertrucks, due to the potential for an exterior panel to fall off. Shares of the EV maker reversed an early loss to end up 0.17%, but the shares are still down more than 40% this year. Commerce Secretary Howard Lutnick said in a Fox News interview to buy the shares, but the stock seemed little moved by the suggestion.
- Jabil said its fiscal second-quarter results topped analysts' forecasts. Shares of the electronics manufacturer advanced 3.08%.
- Five Below's earnings surprassed analysts' expectations in the last three months of the year. Shares of the discount retailer jumped 0.69%.
- Madison Square Garden Sports sold the Boston Celtics to an investor group led by William Chisholm for $6.1 billion, pending approvals. The stock gained 0.7%.
- Darden Restaurants, owner of LongHorn Steakhouse and Olive Garden, said its earnings in its fiscal third quarter topped analysts' expectations but sales missed. Shares added 5.75%.
- Shares of Nvidia gained 0.86% after the chip giant's chief executive Jensen Huang told the Financial Times the company would spend hundreds of billions of dollars on chips and other electronics made in the U.S.
- Accenture raised its full-year revenue forecast on artificial intelligence services demand, but its earnings on its fiscal second quarter fell short of analysts' forecasts. Shares of the IT service provider slumped 7.26%.
Cryptocurrency
On Wednesday, fintech Ripple said the Securities and Exchange Commission is dropping its appeal of a court decision that Ripple’s sales of the XRP cryptocurrency over exchanges didn't have to comply with investor-protection laws. The move is seen as a sign regulators are shifting toward a softer stance on crypto enforcement under the Trump administration.
On Thursday, Trump said in a prerecorded speech to crypto founders and executives that he wants to make America the “undisputed bitcoin superpower and the crypto capital of the world.”
Bitcoin was last down 3.04% at $84,229.40.
This story was updated with new information.
Medora Lee is a money, markets, and personal finance reporter at Paste BN. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.