Overnight – Fed keeps rates steady, flags higher inflation and slower growth
Stocks swung between gains and losses before closing higher overnight, as rise in chip stocks helped offset a slump in Alphabet and the Federal Reserve hawkish pause.
The Federal Reserve kept interest rates unchanged, as growing risks to economic growth and higher inflation leave the central bank rooted in its wait-and-see approach until the fog around the impact of the Trump administration’s tariffs is lifted.
“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 Fed said.
The remarks suggest that the Fed isn’t leaning toward rate cuts anytime soon even as tariffs pose a threat to the economy.
Trump said on Wednesday that he was not open to pulling back on the 145% tariffs imposed on Beijing, dashing hopes for a sooner rather later U.S.-China trade truce. The remarks came ahead of the U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer meeting with their Chinese counterparts for trade talks in Switzerland this week. The two will travel to Switzerland on May 8.
Announcement of the talks marks a potential thaw in U.S.-China relations, which markets feared would cause a prolonged trade war between the world’s biggest economies, having dire implications for the global economy. Weak data points from the U.S. and China, released over the past week, added to concerns over trade-related disruptions.
Company Earnings
- Alphabet – fell more than 7%, dragging the broader tech sector slower, on concerns about growing competition in online search just as Apple unveiled plans to integrate AI-powered search capabilities into its browsers. The move threatens Alphabet’s revenue-sharing deal with Apple for default Google searches on iOS devices. Apple’s SVP of Services, Eddy Cue, also said that search and browser usage fell for the first time in April, underscoring the growing threat from AI large language models such as ChatGPT.
- NVIDIA – helped offset the losses in broader tech on reports that the Trump administration intends to rescind Biden-era AI chip curbs, which could reshape semiconductor trade restrictions. on guidance came as the company reported quarterly results that were better than feared.
- Walt Disney – stock more than 10% after the entertainment giant reported fiscal second-quarter earnings that beat on the top and bottom lines, boosted by better-than-expected subscriber growth for its Disney+ streaming platform as well as increased spending in its U.S. theme parks.
- Novo Nordisk – stock climbed nearly 2% after the drugmaker cut its sales forecasts on Wednesday for the first time since the launch of its Wegovy weight-loss drug four years ago, but it still anticipated a recovery in its biggest U.S. market.
ASX SPI 8188 (+0.09%)
The ASX should open higher following the offshore lead, on the back of the US Federal Reserve’s decision to keep interest rates steady at 4.25%–4.5%. Markets now anticipate the Fed will hold rates steady until at least June, with the first cut likely in the second half of 2025. No major Australian economic data is due today, but global attention remains on central bank moves and US-China trade talks
- Locally, ANZ Bank reported a flat first-half profit with no dividend increase, and the Federal Court partially allowed shareholder appeals against Commonwealth Bank.
