S&P 500 Beats a Small Retreat as Trade Deals Draw Investor Focus While Fed Punts

The S&P 500 (Index: SPX) retreated a half percent from its previous week’s close, ending the trading week at 5,659.91. During the week, there were two big stories driving stock prices: the Fed’s choice to not resume cutting U.S. interest rates until later in 2025 and the Trump administration’s progress in its trade negotiations after it imposed higher tariffs on U.S. trading partners last month.

The Fed’s reluctance to cut U.S. interest rates drew most investor focus in the early part of the week, which saw the index drop almost 1.5% through Tuesday as Fed officials were expected to punt on cutting rates. The market’s direction changed on Wednesday after the news broke that U.S. and Chinese trade negotiators would meet during the upcoming weekend in Switzerland.

That change in momentum continued on Thursday as the U.S. announced its first major trade deal with the United Kingdom and as more information about the pending trade negotiations with China came out. Friday saw the upward momentum stall with no real new information to affect investor outlook.

The latest update of the alternative futures chart puts the index’ trajectory in the middle of the redzone forecast range we modified in last week’s edition of the S&P 500 chaos series.

The stage is now set for next week, when whatever news comes out from Switzerland over the weekend will drive stock prices. Speaking of which, here is are the headlines that represent the random onset of new information investors had to absorb during the trading week ending on Friday, 9 May 2025.

Monday, 5 May 2025

• Signs and portents for the U.S. economy:

• Oil ends at four-year lows as OPEC+ accelerates output hikes
• Trump orders 100% tariff on foreign-made movies to save ‘dying’ Hollywood

Fed policymakers expected to keep rates steady as tariffs roil outlook

Bigger trouble developing in China:

• How Bad Is China’s Economy? The Data Needed to Answer Is Vanishing

JapanGov minions back off threat to dump US treasuries:

• Japan says no plan to threaten Treasuries sale in US trade talks

BOJ minions think they have time to hike Japan’s interest rates:

• BOJ sees window for rate hikes narrowing but not closed yet

Nasdaq, S&P, and Dow ended lower ahead of the Fed’s rate decision

• S&P 500 snaps 9-session win streak after latest Trump tariff
• Berkshire Hathaway Drops 5% After Warren Buffett’s Retirement: Is The Stock a Buy with Greg Abel as CEO?

• Buffett to step down as Berkshire CEO after 60 years at helm, passes baton to Abel

Tuesday, 6 May 2025

• Signs and portents for the U.S. economy:

• Oil rises 3% on signs of more Europe and China demand, less US output

• The heart of the US oil boom is slowing
• Diamondback lowers output forecast, says US shale at tipping point

Tariff-Frontrunning Sparks Record Trade Deficit in March

Bigger trouble, stimulus developing in China:

• China’s services growth hits 7-month low as tariffs bite, Caixin PMI shows

• Hong Kong’s freight forwarding industry hit by trade war, SCMP reports

Thermal coal prices hit 4-year low in Asia as China imports wane

Wall Street extends losses to a second straight day ahead of Fed rate decision

Wednesday, 7 May 2025

• Signs and portents for the U.S. economy:

• Top officials from U.S. and China to hold trade talks on Saturday in Geneva
• Oil settles lower as hopes dim for US-China trade and supply worries ease

Fed minions do what they were expected to do, despite rising risks to US economy:

• Fed likely to leave rates unchanged as it hunts for clarity on the economy
• Fed sees rising risks to economy as it leaves rates unchanged

• Fed Rejects Trump Calls To Cut Rates: Warns Of “Increased” Stagflationary “Uncertainty”

Bigger stimulus developing in China:

• China Cuts Rates To Stimulate Struggling Economy, Just Hours After Agreeing To Tariff Talks

• China c.bank cuts 7-day reverse repo rate, effective May 8
• China injects ‘tactical’ monetary stimulus ahead of US trade meeting

Central banks rethinking direction of their monetary policies:

• Major central banks’ easing push slows to a trickle in April
• Brazil central bank hikes rates to near 20-year high, leaves next steps open
• Bank of England set to cut rates amid worries about Trump tariff fallout
• BOJ split over how US policies impact rate hikes, March minutes show

Eurozone minions threaten tariffs on U.S. goods:

• EU Set to Tariff $113 Billion in U.S. Goods If Trade Talks Break Down

Wall Street closes out choppy trading session by snapping a two-day losing streak

• Gold drops over 1% on Powell’s cautious views, easing trade tensions

Thursday, 8 May 2025

• Signs and portents for the U.S. economy:

• Britain set to strike first deal to cut Trump tariffs
• Trump says China wants to make a trade deal, is open to lowering tariffs if talks go well

• US weighs plan to lower China tariffs to as low as 50%, New York Post reports

Near-record US container import streak expected to snap in May due to tariffs

Oil prices steady after dropping as economic uncertainty, supply concerns weigh

• OPEC April oil output edges lower despite plans for hike, survey finds
• U.S. exports of natural gas liquids touch record high in April

Higher interest rates to delay U.S. residential market recovery, CRH CEO says

• Trump castigates Fed’s Powell for not cutting rates, downplays inflation risk

Bigger trouble, stimulus developing in China:

• Trade war set to slash China’s steel exports, aggravating oversupply at home
• China exempts some US imports from tariffs

BOE minions cut UK interest rates:

• BoE cuts rates to 4.25% as it sees tariff hit to growth

Bigger trouble developing in Japan:

• Toyota sees 21% full-year profit decline as tariffs take a bite

ECB minions still excited to deliver more interest rate cuts to Eurozone:

• Central banks in Europe keep easing on the agenda even as Fed stays firmly on hold

Wall Street ends higher after Trump says ‘go out and buy stock now’

• Bitcoin retakes $100,000 on global trade deal optimism
• Gold falls more than 1% after Trump announces UK trade deal

Friday, 9 May 2025

• Signs and portents for the U.S. economy:

• Oil prices post weekly gains on US-China trade talk optimism

• US oilfield giants brace for tough times as price slide rattles producers

Ahead of key China talks, Trump says 80% tariff ‘seems right’

Exclusive: India offers to slash tariff gap by two-thirds in dash to seal trade pact with Trump

Fed minions say they don’t really know what’s going on while confidently asserting the US job market is doing great and that tariffs will slow the economy and cause inflation:

• Fed officials, citing uncertainty, reiterate patient policy stance
• Fed’s Kugler says US labor market stable, close to maximum employment
• Fed’s Barr: tariffs to boost inflation, slow growth later this year
• Fed’s independent structure has proved its worth, Waller says
• Ex Fed’s Warsh highlights a path to lower rates, takes a fresh dig at the Fed

Bigger US trade deal developing in China?

• Inside China’s decision to come to the table on Trump tariffs

• Fear Of Economic Collapse Forced China To Negotiate With Trump, Quietly Reach Out First: Reuters Report
• China’s latest stimulus measures fail to impress as investors focus on U.S. trade talks

China’s April soybean imports hit decade-low as customs delays disrupt trade

China’s exports top forecasts helped by global rush to beat tariffs

• China’s April exports beat expectations, imports narrow declines

U.S. stocks finish slightly lower ahead of possible weekend China trade deal

The CME Group’s FedWatch Tool projects the Fed will refuse to resume cutting the Federal Funds Rate until the conclusion of its 30 July (2025-Q2) meeting. The FedWatch Tool also forecasts the Fed will reduce U.S. interest rates just twice before the end of 2025, anticipating 0.25% cuts in the Federal Funds Rate on 17 September (2025-Q3) and 10 December (2025-Q4).

The Atlanta Fed’s GDPNow tool boosted its projection of real GDP growth in the U.S. during the current quarter of 2025-Q2 from +1.1% to +2.3%. This estimate is near the upper end of the so-called “Blue Chip consensus” range, where the overall average expected real GDP growth rate for the quarter is about 0.8%.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull and bear who are watching U.S. and Chinese trade negotiators”.