Weekly Market Insights | Fed Talk Calms Volatility for the Week

Stocks were mixed last week as volatility dropped despite ongoing trade concerns and the Federal Reserve's update on short-term rates.

The Dow Jones Industrial Average added 0.16 percent, while the Standard & Poor’s 500 Index lost 0.47 percent. The tech-heavy Nasdaq Composite Index slipped 0.27 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 0.37 percent.^1,2

Stocks Trade Sideways

Stocks dropped on Monday, ending the S&P 500's 9-day winning streak as the trade anxiety weighed on investors.^3,4

Sentiment picked up midweek, however. In a widely expected move, the Fed held short-term interest rates steady but warned of lingering uncertainty around tariffs' effects on inflation and unemployment.^5,6

On Thursday, the U.S.-U.K. trade deal sparked a slight rally, but stocks flattened as the week ended. Investors appeared to be risk-averse with U.S.-China trade talks scheduled for the weekend.⁷

The Fed Fans Out

The Federal Reserve wanted to get its message out last week. Within 48 hours of the Fed’s decision to leave interest rates unchanged, nearly every Fed governor gave a solo speech or discussed the decision on a panel.

One Fed official spoke about the benefits of long-term stability from an independent Fed. At the same time, another said the Fed was paying close attention to what consumers did—and not just what they said, suggesting that flagging consumer sentiment didn’t necessarily mean a slowdown in spending.⁷

The Fed seemed to focus on managing expectations. Perhaps more importantly, Fed officials spoke from a coordinated playbook, possibly designed to help settle financial markets, but I think the Fed should be lowering interest rates based on the facts that the the economy is slowing and consumers are spent out, levered with a growing number getting by with buy now pay later programs. Especially hard hit are the low-end consumers. Unfortunately, the Fed has been historically late with its actions and flat out wrong (inflation was transitory?) and Powell stated that he wanted to "wait" until the hard data signaled weakness before he lowered interest rates, but doing so puts the economy at great risk.

The New York Fed Consumer Expectations Survey that was released noted that many consumers expect higher inflation, lower incomes and higher unemployment rates which we have all witnessed by the Bureau of Labor Statistics continuing revisions of lower jobs reported month after month now going on its second year.

Gold
•    Weekly Performance: Gold prices experienced volatility but ended the week at over $3300 a troy ounce for an approximate 3% gain. 
•    Market Drivers:
o    Early-week gains were driven by safe-haven demand amid global economic uncertainty.
o    Later in the week, prices dipped due to a strengthening U.S. dollar and reduced safe-haven appeal following the announcement of a U.S.-UK trade deal. 
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🛢️ Oil
•    Weekly Performance: Oil prices rebounded, marking their first weekly gain since mid-April.
•    Closing Prices:
West Texas Intermediate (WTI): $61.02 per barrel.
Brent Crude: $63.91 per barrel.
•    Market Drivers:
Optimism surrounding upcoming U.S.-China trade negotiations contributed to price increases.
However, gains were tempered by concerns over rising supplies due to OPEC+ production increases and a stronger U.S. dollar.
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₿ Cryptocurrency
•    Bitcoin (BTC):
Weekly Performance: Surged past $104,000 during the week, reflecting strong investor demand.

•    Ethereum (ETH):
Weekly Performance: Rallied over $2,400 . Ethereum activated its long-awaited "Pectra" upgrade on Wednesday, marking the blockchain's most significant overhaul since the Merge in 2022. The update aims to streamline staking, enhance wallet functionality, and improve overall efficiency.

•    Market Drivers:
Investor optimism amid an uncertain U.S. economy fueled the crypto rally.
Cumulative inflows into the U.S.-listed spot bitcoin exchange-traded funds (ETFs) have hit an all-time high of $40.62 billion, signaling continued institutional adoption.
Stable U.S. Treasury yields and a moderate positive correlation with stock market indices also supported crypto prices. 

Equity market volatility has been heightened throughout much of this year, resulting in the S&P 500 seeing 10 days where it has moved at least 2% in either direction. This is more than the number of days we saw in 2023 and 2024 combined. Something is brewing and from a technical viewpoint we have a rising triangle where the market could break hard either up or down. 

Yes, there is great optimism with AI and many new technologies that will enable companies to boost profits, but I have been in this game for over four decades and from my experience all the signs are also present for a dramatic drop in equities. I could write a book on the matters, but let me leave you with "stay tuned". 

Partner with a Certified Financial Fiduciary at Castle Financial - In these volatile and uncertain times, the biggest value of working with a seasoned advisor, acting as a fiduciary, is having someone to help control emotions and not get caught up in making bad investment decisions. Let's face it, when times are turbulent, emotions will often trump logic, leading to devastating financial decisions. 

Email julie@castlefinancial.com or call us at 732-888-4994 to schedule a complimentary 30 minute consultation and second opinion if you are not already a valued client of Castle Financial.

This Week: Key Economic Data

Monday: Federal Budget.

Tuesday: Consumer Price Index (CPI). NFIB Small Business Optimism Index.

Wednesday: San Francisco Fed President Mary Daly speaks.

Thursday: Retail Sales. Jobless Claims (weekly). Producer Price Index (PPI). Industrial Production. Business Inventories. Home Builder Confidence Index.

Friday: Import Price Index. Housing Starts. Building Permits. Consumer Sentiment.

^{Source: Investors Business Daily - Econoday economic calendar; May 9, 2025
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Wednesday: Cisco Systems, Inc. (CSCO)

Thursday: Walmart Inc. (WMT), Deere & Company (DE), Applied Materials, Inc. (AMAT), NetEase, Inc. (NTES)

^{Source: Zacks, May 9, 2025. Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

"Innovation is saying ‘no’ to 1,000 things."

– Steve Jobs

Don’t Forget to Take Advantage of the Work Opportunity Tax Credit

The work opportunity tax credit is a federal tax credit for business owners who have hired individuals from target groups that would have otherwise faced significant barriers when looking for a job. Some target groups include summer youth employees, those receiving Supplemental Security Income, or qualified long-term unemployment recipients. There are ten targeted groups in total.

The work opportunity tax credit equals 40% of up to $6,000 in wages paid or incurred, with a maximum credit of $2,400. The WOTC may consider up to $24,000 in wages for certain qualified veteran-targeted groups. The restrictions are on the IRS website.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional. 

Tip adapted from IRS⁸

Stay Safe This Summer With These Open Water Safety Tips

Summer is the perfect time to spend at the beach, lake, or river. But unfortunately, these natural bodies of water can also be hazardous if you don’t know how to stay safe. Here are some tips to help you and your family stay safe in the water this summer:

• Only swim in the designated swimming area. Take note of flags and buoys that mark where you can and can’t swim.
  
• When in doubt, get out! If something doesn’t feel suitable, such as a current picking up, it’s better to use caution and get out.
  
  
• Know the conditions before you swim. The more you know about water levels, temperature, and current, the better.
  
  
• Never swim alone when in open water. Always swim with a buddy who can look out for you, and you can look out for them.

Tip adapted from National Drowning Prevention Alliance⁹

What always shows up in the middle of March and the middle of April?

Last week’s riddle: A word appears, and six letters it contains. Subtract only one, then twelve remains. What is this word?
Answer: Dozens.

Golden Temple
Laojunshan, Luoyang, China

Footnotes and Sources

^{1. The Wall Street Journal, May 9, 2025}

^{2. Investing.com, May 9, 2025}

^{3. CNBC.com, May 5, 2025}

^{4. CNBC.com, May 6, 2025}

^{5. The Wall Street Journal, May 7, 2025}

^{6. CNBC.com, May 8, 2025}

^{7. The Wall Street Journal, May 9, 2025}

^{8. IRS.gov, November 11, 2024}

^{9. NDPA.org, December 12, 2024}