Wall Street Slips as Fed Rate Cut Bets Grow/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stocks edged lower Thursday as mixed economic data failed to clarify the trade war’s impact. The S&P 500 was on track for its first weekly loss, while Treasury yields dipped. Traders increasingly expect a Fed rate cut later in 2025.
Wall Street Slips as Fed Rate Cut Bets Grow: Quick Looks
- S&P 500 dipped 0.3% Thursday morning, possibly marking its first weekly decline.
- Dow Jones fell 139 points, while Nasdaq dropped 0.8%, led by tech and retail losses.
- Retail sales came in weaker than expected, adding to economic uncertainty.
- Wholesale inflation was better than forecast, lowering recession fears slightly.
- Walmart stock slid 3.1% despite a strong earnings report, citing unpredictable tariffs.
- Cisco jumped 5.8% after upbeat AI-driven profit projections.
- Dick’s Sporting Goods plunged 14.9% after announcing a $2.4B acquisition of Foot Locker.
- Oil prices fell 2.5% amid possible U.S.-Iran nuclear talks.
- Bond yields dropped, with the 10-year at 4.49%, on expectations of Fed rate cuts.
- Fed Chair Powell warned of inflation risks from global supply shocks.
Wall Street Slips as Fed Rate Cut Bets Grow
Deep Look
U.S. stocks pulled back on Thursday as investors navigated a wave of conflicting economic reports and renewed trade war concerns, pushing the S&P 500 toward its first potential weekly loss. The index was down 0.3% in morning trading, while the Dow Jones Industrial Average fell by 139 points, or 0.3%. The tech-heavy Nasdaq composite saw a steeper drop of 0.8%.
The bond market responded with sharper moves. Treasury yields declined as investors digested a set of mixed signals about the health of the economy. On one hand, U.S. retail sales came in lower than expected for April, suggesting consumers are tightening their wallets following a pre-tariff spending spree. On the other hand, wholesale inflation data surprised on the upside, showing a more tempered rise in producer prices.
Additional reports revealed that while the manufacturing sector continues to contract, the number of Americans filing for unemployment benefits fell short of projections—indicating some resilience in the labor market.
Altogether, the data increased speculation that the Federal Reserve may intervene later this year with interest rate cuts, especially if economic growth continues to show signs of strain under the weight of President Trump’s erratic tariff strategies. However, the reports failed to offer a clear trajectory—leaving markets in limbo.
One of the starkest examples of the uncertainty was Walmart, which saw its stock drop 3.1% despite outperforming earnings expectations. The retail giant declined to issue guidance for the current quarter, with CFO John David Rainey citing “an unusually wide range of possible outcomes.” Walmart confirmed that Trump’s tariffs are forcing them to raise prices, further squeezing profit margins in an already competitive landscape.
Deere echoed similar caution, noting “near-term market challenges” and revising its profit outlook downward. Still, investors rewarded the agricultural equipment maker with a 4.2% stock bump after it posted better-than-expected quarterly results.
Tech standout Cisco Systems surged 5.8%, driven by optimism surrounding its artificial intelligence expansion and a strong earnings beat. Analysts pointed to Cisco’s growing AI capabilities as a future revenue catalyst.
However, not all corporate news was positive. Dick’s Sporting Goods fell sharply—14.9%—after announcing a $2.4 billion acquisition of Foot Locker. Despite posting stronger-than-expected profits, investors reacted skeptically to the purchase of the struggling footwear brand. Conversely, Foot Locker shares skyrocketed by 83.3%, recovering some of the 41% it had lost earlier this year.
The merger marks the second major footwear acquisition in recent weeks. Skechers recently agreed to a $9 billion private buyout by 3G Capital, signaling growing consolidation as retailers struggle to adapt to shifting trade policies and rising costs.
In commodities, crude oil dropped about 2.5% amid speculation that a diplomatic breakthrough between the U.S. and Iran could ease sanctions and flood the market with additional supply. A potential nuclear agreement with Iran would increase oil availability, tempering recent price hikes.
On the geopolitical front, China announced that it would suspend some of its non-tariff retaliatory measures against the U.S., as part of the temporary cease-fire in the ongoing trade war. However, tensions remain elevated. The Chinese Commerce Ministry criticized the U.S. decision to ban Ascend computer chips made by Huawei, claiming the move violates global trade rules.
International markets mirrored the mixed tone. Hong Kong’s Hang Seng fell 0.8%, Shanghai’s composite dropped 0.7%, and European indexes were largely flat.
The bond market echoed the cautious sentiment. The yield on the 10-year U.S. Treasury note declined to 4.49% from 4.53% the day before. More notably, the 2-year yield, a barometer for Fed policy expectations, dipped to 3.99% from 4.05%, indicating growing confidence among traders that the Fed will begin cutting rates by September.
Federal Reserve Chair Jerome Powell added a note of caution in a speech Thursday, warning that the global economy may be entering a period of frequent and persistent supply shocks. He emphasized that such conditions could make inflation harder to control and create challenges for central banks trying to maintain price stability while supporting growth.
The Fed has so far held interest rates steady in 2025, opting to observe how Trump’s trade actions play out. But with businesses like Walmart and Deere struggling to navigate volatile tariffs, and with consumer spending patterns shifting, pressure is mounting for the central bank to act.
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