Fed holds rates, warns of Tariff Risks 08/05/2025

HOT stories for today

US market wrap:

• The S&P 500 swung back and forth after the Federal Reserve’s policy announcement but ultimately closed up 0.43%, bolstered by a more than 3% rally in Nvidia. The surge in the AI bellwether followed a Bloomberg report suggesting the Trump administration may lift chip trade restrictions. The tech-centric Nasdaq Composite added 0.27%, while the Dow Jones Industrial Average advanced 0.7%.
• The Federal Open Market Committee left its benchmark interest rate unchanged at 4.25%–4.5%, though it noted growing uncertainty. The Fed flagged rising risks of higher inflation and unemployment, signaling a more cautious economic outlook. During his press conference, Fed Chair Jerome Powell emphasized the central bank remains in a “wait and see” mode. As for Trump’s ongoing remarks about the Fed? Powell dismissed their relevance, saying they have no bearing on his role. Meanwhile, Treasury Secretary Scott Bessent played down expectations ahead of his Friday meeting with Chinese officials in Switzerland to kick off new trade discussions.
   

Fed holds rates, warns of Tariff Risks
 

• The Federal Reserve kept interest rates unchanged for the third consecutive meeting on Wednesday, while warning of increased economic uncertainty tied to rising tariffs and a cooling economy. In its statement, the central bank highlighted elevated risks of both inflation and unemployment, noting that “uncertainty around the economic outlook has increased further.” Chair Jerome Powell emphasized that interest rates remain “well positioned” amid unpredictable conditions, adding, “there is just so much we don’t know.” He signaled no urgency to adjust policy, citing unclear responses to the ongoing trade disruption.
• The U.S. economy contracted in Q1 as consumer spending slowed and businesses rushed to import goods ahead of anticipated tariff hikes. Although the labor market has held up, concerns are rising among consumers and investors about the long-term effects of trade tensions. Trump’s aggressive tariff policy rollout—followed by a temporary 90-day pause—has injected additional volatility. Despite pressure from the White House to lower rates, Powell dismissed political influence. The Fed still projects two rate cuts this year, but officials stress they need clearer data before acting.
   

Stocks on the move:

• AppLovin (APP) — Shares soared 13% in after-hours trading as the AI-driven marketing firm posted stronger-than-expected quarterly results. The company also announced the sale of its mobile gaming division to Tripledot Studios for $400 million in cash and roughly a 20% equity stake in Tripledot.
• Arm Holdings (ARM) — U.S.-listed shares dropped 9% after the chip architecture firm issued disappointing guidance for the fiscal first quarter, projecting adjusted earnings of 30–38 cents per share versus FactSet’s 42-cent consensus. The weak outlook overshadowed fourth-quarter revenue and earnings beats.
• Carvana (CVNA) — The online used car retailer slipped 1%, despite delivering solid Q1 results. Management expects a continued sequential rise in retail units sold and adjusted EBITDA in the second quarter.
• Zillow (ZG) — The real estate platform dropped nearly 5% after cautioning that the housing market remains difficult. Still, Zillow posted better-than-expected Q1 earnings—41 cents per share on $598 million in revenue—marking its first profitable quarter since 2022. The company forecasts low- to mid-teen revenue growth for 2025.
   

Today’s action
 

• Asia-Pacific markets traded with little direction Thursday after the U.S. Federal Reserve held interest rates steady and flagged rising inflation and unemployment risks. Japan’s Nikkei 225 gained 0.25%, South Korea’s Kospi added 0.21%, and the Kosdaq climbed 0.58%. Australia’s S&P/ASX 200 was flat, while Hong Kong’s Hang Seng rose 0.24% and China’s CSI 300 was unchanged. Investors are closely watching the upcoming U.S.-China trade discussions, with Treasury Secretary Scott Bessent set to meet his Chinese counterpart in Switzerland later this week.
• U.S. stock futures were little changed Wednesday evening, with S&P 500 and Dow futures both down 0.1%, and Nasdaq-100 futures slightly lower. Looking ahead, key economic reports due Thursday include weekly jobless claims and the New York Fed’s consumer expectations survey. On the earnings front, results are expected from ConocoPhillips, Warner Bros. Discovery (WBD), Paramount Global (PARA), and Expedia (EXPE).

Watchlist: CVNA, ARM, FTNT, ZG, APP, GOOGL, EXPE, SHOP, PLTR
 

Bitcoin
 

• Bitcoin surged back to $98,000 for the first time in nearly three months after the Federal Reserve opted to hold interest rates steady, brushing off political pressure from President Trump, who recently criticized Chair Jerome Powell for delaying cuts.
• Despite brief volatility following the announcement, BTC rebounded strongly amid rising investor confidence—fueled by a return to “Greed” on the Crypto Fear & Greed Index and nearly $4.41 billion in spot ETF inflows since late March. Analysts say maintaining key support above $95,000 could pave the way for a retest of the $109,000 all-time high.
  Watchlist: Bitcoin: 74 000-100 000, Ethereum:1500-2800, Solana: 80-180
   

Forex
 

• The Japanese Yen (JPY) edged higher during Thursday’s Asian session, clawing back part of Wednesday’s losses against the U.S. Dollar (USD). Support came from revived safe-haven demand and hawkish signals in the Bank of Japan’s March minutes, which hinted at potential tightening in 2025. Meanwhile, the USD slipped despite the Fed’s hawkish pause, pushing USD/JPY below the 144.00 level.
• The euro remained rangebound near 1.1300 against the dollar, as markets digested the Fed’s expected rate hold and Fed Chair Powell’s cautious tone. With a light European data calendar, traders continue to speculate on the timing of a potential Fed pivot toward rate cuts by mid-year.
  Watchlist: EUR/USD: 1.0700-1.1600, USD/JPY: 140-144
   

Basic Materials
 

• Gold (XAU/USD) advanced on Thursday, holding firm near the $3,400 level as renewed U.S.-China trade uncertainty and simmering geopolitical risks—from Ukraine to the India-Pakistan border—boosted demand for safe-haven assets. Despite the Fed’s hawkish pause, the U.S. dollar struggled to find sustained support, while gold bulls appeared unfazed by a broadly positive risk tone.
• WTI crude oil rebounded to around $58.10 per barrel during the Asian session, buoyed by a larger-than-expected 2.032 million barrel draw in U.S. inventories, according to the EIA. However, gains remain capped amid uncertainty over trade talks and a cautious Fed policy outlook.
  Watchlist: GOLD 2600-3500, US Oil: 55.60-70.00
   

Key Economic Events Today:

EST time
08:30 am: USD Unemployment Claims
10:00 am: USD Wholesale Inventories
01:01 pm: USD 30-y Bond Auction
 

Earnings

BMO (Before the US Market opens)
SHOP        Shopify Inc.
COP          ConocoPhillips
SRE           Sempra
AMC (After the US Market closes): COIN, MCK, MNST
 

The TEFS Analyst team wishes you a successful day!