What happened last week…
Over the weekend, the US and China agreed to a 90 day reprieve on their substantially high tariff rates. Both parties agreed to cut their reciprocal tariffs to 10% while the US will still charge a 20% fentanyl tariff on Chinese imports.
The Federal Open Market Committee (FOMC) keptinterest ratesat 4.25% to 4.50%. The rate has been unchanged since last December. In its statement, the FOMC said, “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.” The next FOMC meeting takes place June 17-18.
Federal Reserve ChairmanJerome Powellsaid, “If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent.” Powell acknowledged the uncertainty regarding tariffs has put the Federal Reserve in a “wait and see” approach. Powell said, “Our policy is well positioned. The costs of waiting to see further are fairly low.”
Intariff news, President Donald Trump announced a trade deal with the United Kingdom. Though the deal has yet to be finalized Trump said, “In the coming weeks we’ll have it all very conclusive.” The 10% baseline tariff previously established on U.K. imports will remain in place.
Thenon-manufacturing PMIfor April beat expectations (50.6) as it increased to 51.6 from 50.8, which marked ten straight months of expansion. The figure has expanded in 56 of the previous 59 months.
According to FactSet, as of May 9, for Q1 2025, 90% of S&P 500 companies reported earnings with 78% having a positive EPS surprise and 62% having a positive revenue surprise. The blendedearnings growthfor the S&P 500 is 13.4%, which would be the second-straight quarter of double-digit growth. The blendedrevenuegrowthfor the index is 4.8%, which would be the 18th consecutive quarter of growth for the index.
Happening this week…
The following company reports earnings this week: WMT.
On Tuesday, theinflation rateyear-over-year for April is expected to remain at 2.4%, which was the lowest since September 2024 (2.4%). The rate peaked at 9.1% in June 2022. Meanwhile, thecore inflation rateyear-over-year for April is expected to remain at 2.8%, which was the lowest reading since March 2021 (1.6%).
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- The Rockline Team
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