In a shortened holiday week, uncertainty around tariffs, trade, and earnings pushed all three major equity indexes lower, with the S&P 500 Index falling -1.5% and the Dow Jones and NASDAQ moving lower by -2.6%. The Trump Administration put further export restrictions on semiconductors to China, which put downward pressure on technology stocks like NVIDIA. Federal Reserve Chairman Jay Powell further dampened markets by reiterating that the Fed will remain patient on rate cuts given the continued uncertainty around inflation and economic growth. In an odd twist on EPS estimates, the CEO of United Airlines gave two scenarios for future earnings: one with greater airline travel and a growing economy, and one with lesser airline travel due to a slowing economy. This is exactly the type of uncertainty that continues to roil markets, especially regarding companies hiring employees or making decisions around capital expenditures. In a modest flight to quality trade, U.S. Treasury Bonds rallied, with the 10-year Treasury falling 14 basis points to close the week at 4.35%.

U.S. & Global Economy

The data from last week reflects that the U.S. economy, regardless of the trade and tariff uncertainty, continues to chug along, led by the consumer. U.S. Retail and Food Service Sales for the month of March 2025 jumped to +1.43% from the prior month of +0.22%. The increase in retail sales proves that U.S. consumers refuse to slow spending. One theory on the increase in consumer spending could be a rush to buy things at today’s prices rather than risk increases in prices once, if ever, tariffs are enacted, and prices increase across the board for goods and services. We expect this lack of clarity to continue if the same lack of clarity comes from Washington.

Policy and Politics

As mentioned above, the Federal Reserve is in a clear holding pattern as it navigates decision-making around tariffs, inflation, economic growth, and the consumer. Most economists are expecting 2-3 additional rate cuts this year, which would bring the Fed Funds Rate to around 3.50%. Elevated tariffs will increase prices and therefore inflation and decrease consumer spending, which in turn slows the economy, thereby allowing the Fed to lower rates. Uncertainty in any of those inputs keeps the Fed on hold and the economy and markets guessing, which no one likes!

Economic Numbers to Watch This Week

• U.S. New Single-Family Houses Sold for March 2025, prior 676,000.
• U.S. Durable Goods New Orders MoM for March 2025, prior 0.94%
• U.S. Initial Claims for Unemployment Insurance for the week of April 19, 2025, prior 215K.
• U.S. Existing Home Sales for March 2025, prior 4.26M
• U.S. Index of Consumer Sentiment for April 2025, prior 50.8

The underlying U.S. economy remains resilient, as we have stated week after week. Basic measures like consumer spending, corporate EPS, bank health, and the labor market remain healthy. However, uncertainty abounds in Washington’s policy regarding tariffs, Fed policy, and trade agreements. This uncertainty had led to a drastic drop in consumer confidence. Our concern lies with the resilience of the consumer to maintain a healthy, if not robust, spending pattern. President Trump placed a 90-day hold on tariffs for most countries while new trade agreements are reached among participating countries. Expect heightened volatility for the near future. There are tail winds hiding out there in the form of the extended Tax Cuts and Jobs Act and the passage of the “One Big Beautiful Bill.” If you have any questions or need more information, contact your advisor at Valley National Financial Advisors.