The S&P 500 is on a record-setting win streak ahead of Fed week
The S&P 500 gained 1.5% on Friday, May 2, to mark its ninth consecutive advance. This is the longest winning streak for the broad-market index since November 2024, according to Dow Jones Market Data.
And it's particularly notable given recent stock market volatility in reaction to tariff uncertainty. Indeed, the S&P 500 was down more than 15% for the year to date in mid-April. It has since pared this deficit to just 3.3%.
The rebound occurred "as progress on tariff talks helped calm investor fears," says Mark Hackett, chief market strategist at Nationwide, and was helped by steady retail buying and institutional investors coming off the sidelines.
"Investors' positive response to earnings suggests expectations were appropriately reset, but with emotions still elevated, volatility is likely to remain," Hackett adds.
Read more: Stock Market Today: S&P 500 Nabs Longest Win Streak Since 2004
Markets now expect a July rate cut
A strong April jobs report lowered the odds of a June rate cut and pushed expectations for one out to July.
According to CME FedWatch, futures traders are now pricing in a 34% chance the Federal Reserve will lower the federal funds rate by a quarter-percentage point in June, down from 55% one week ago and 61% one month ago.
The probability that the next rate cut will come in July rose to 56% from 44% on Thursday and 44% one month ago.
- Karee Venema
What experts are saying about the jobs report and the Fed
Several of Wall Street's top minds are chiming in on what the April jobs report means for the Fed and interest rates. Here's a sampling of what they're saying:
"The jobs data for April are reassuring, but business and consumer surveys point to uncertainty ahead. They reflect a lot of concern about general economic conditions with higher tariffs," says Bill Adams, chief economist at Comerica Bank. "There are also some indicators that businesses are reining in plans for hiring and capital spending."
Adams adds that the hard data carries more weight in the Fed's decision-making than what they forecast might happen in the future, "and the job market was fine in April." As such, Adams expects the central bank to hold steady next week and will likely lower rates with less frequency going forward than many are anticipating.
"Like the U.S. economy, job growth is gradually weakening but remains strong enough to support consumer spending early in Q2 – as tariff-related price increases just begin to bite," says Jennifer Timmerman, investment strategy analyst at Wells Fargo Investment Institute (WFII). "Resilient labor-market conditions will likely keep the Fed on the sidelines until tariffs more clearly pressure economic growth."
"With the U.S. labor market conditions remaining intact, the Fed can remain a spectator on the sidelines with respect to policy changes as the fallout from Trump's higher tariff regime and shifting trading policy appears to be lagging," says Charlie Ripley, senior investment strategist for Allianz Investment Management. "Ultimately, this report is consistent with other labor metrics that conclude the U.S. economy is not experiencing a material shift in labor conditions."
- Karee Venema
President Trump chimes in on rate cuts after the April jobs report
President Trump quickly took to Truth Social after this morning's release of the April jobs report, encouraging the Federal Reserve to cut interest rates as soon as possible.
In an early Friday post, he wrote:
"Gasoline just broke $1.98 a Gallon, lowest in years, groceries (and eggs!) down, energy down, mortgage rates down, employment strong, and much more good news, as Billions of Dollars pour in from Tariffs. Just like I said, and we're only in a TRANSITION STAGE, just getting started!!! Consumers have been waiting for years to see pricing come down. NO INFLATION, THE FED SHOULD LOWER ITS RATE!!! DJT"
- Karee Venema
April jobs report gives the Fed more wiggle room
The April jobs report came in stronger than expected, showing the U.S. labor market is slowing but still healthy. While this is good news for the Fed, which has repeatedly said it is in no rush to cut interest rates, the heightened uncertainty from President Trump's trade war has many pushing the central bank to act sooner rather than later.
According to the Bureau of Labor Statistics, nonfarm payrolls rose by 177,000 in April. This was lower than March's downwardly revised 185,000 figure but more than the 133,000 new jobs economists expected. February jobs growth was also lowered.
The unemployment rate, which is calculated from a separate survey, remained at 4.2%.
"Although markets had braced for a slowdown in job growth – due to factors like DOGE job cuts, increased immigration reform, and soft economic indicators – private sector hiring has remained resilient," said Kevin O'Neil, associate portfolio manager and senior research analyst for Brandywine Global.
O'Neil adds that while the stronger-than-expected employment data "gives the administration more breathing room in its trade negotiations," it also suggests that "the Federal Reserve is unlikely to shift its current policy stance in the near term."
Read more: Strong April Jobs Report Lowers Rate-Cut Hopes: What the Experts Are Saying
Where are all the Fed speakers right now?
The Fed-speak is non-existent right now. That's by design. And, setting aside arguments about correlation vs causation, markets are behaving well in the silence.
Since Saturday, April 26, and until Thursday, May 8, participants in the FOMC meeting have been bound by a Federal Reserve policy that limits the extent they can talk about the economy and interest rates.
These two-week "blackout periods" begin the second Saturday preceding an FOMC meeting and end the Thursday following a meeting. An unofficial practice that began in the 1980s was formalized in 2011 and reaffirmed in January.
Fed-watchers see the policy as a measure against corruption and the potential for information leaks to distort markets. It also provides cover for open discussion during the Fed's most intense periods of policy-making.
During the current quiet period, the S&P 500 has rallied 2.0%, the Dow Jones Industrial Average 2.1% and the Nasdaq Composite 2.6%.
- David Dittman
Treasury Secretary Bessent chimes in on rate cuts
Does the bond market agree with President Trump about rate cuts?
"Yes," according to Treasury Secretary Scott Bessent. "We are seeing that two-year rates are now below fed-funds rates," Bessent said Thursday morning on Fox Business. "So that’s a market signal that they think the Fed should be cutting."
Bessent had previously refrained from commenting on Federal Reserve policy.
As Nick Timiraos of The Wall Street Journal reports, "Two-year Treasury yields were below the Fed's short-term rate for all of 2023 and much of 2024."
The market saw the Fed engineering "a soft landing that brought inflation down without a recession," Timiraos explains, "or that inflation would fall and the Fed would cut rates because the economy fell into a recession."
Amid recent incoming data suggesting the economy is weakening, 30-day fed funds futures prices show expectations for as many as four and even five rate cuts this year.
The market sees a greater than 95% probability the Fed will hold next week. The FOMC will meet five more times in 2025 after the May meeting.
- David Dittman
The Bank of Japan cuts its growth forecast
On Thursday, the Bank of Japan (BOJ) cut its growth forecasts for this fiscal year, citing "extreme" uncertainty related to global trade policies.
The central bank now expects the Japanese economy to grow just 0.5% in the fiscal year ending March 31, 2026, down from 1.1% in January. It anticipates a slightly higher 0.7% growth rate for the following fiscal year.
The BOJ also kept interest rates unchanged at 0.5% for the second straight meeting.
Japan's officials are currently undergoing trade negotiations with the Trump administration, hoping to hash out a deal to lower tariffs on the country's exports of its auto and electronics parts.
"The series of tariffs must be reconsidered, as they are currently beginning to cause substantial damage to our nation's economy," said Ryosei Akazawa, Japan's economic minister, when he arrived in the U.S. earlier this week.
"We want to make as much progress as possible toward an agreement that fosters a win-win relationship," Akazawa added.
- Karee Venema
Initial jobless claims are on the rise
The "price stability" part of the Federal Reserve's dual mandate is more front-of-mind for investors, traders and speculators as President Trump's tariffs begin to impact the global economy.
"Full employment" has been less of a concern, even amid slowed-down hiring and stagnating wage growth.
But the Department of Labor reported Thursday morning that initial jobless claims increased by 18,000 to 241,000 during the week ending April 26, well above a consensus estimate of 223,000.
"The Fed is far too sanguine on the labor market given the incoming data," writes Renaissance Macro Research Head of Economics Neil Dutta.
Initial claims for the prior week were revised from 222,000 to 223,000. The four-week moving average increased by 5,500 to 226,000. The previous week's average was revised up by 250 from 220,250 to 220,500.
Continuing claims increased to 1.916 million for the week ending April 19, their highest level since 2021.
According to Dutta, "The bigger story is that continuing claims keep rising roughly 5% year-over-year. As job finding rates remain low, spells of unemployment go up."
The "meaningful increase" in initial claims indicates "that continuing claims might be rising a bit more in the weeks ahead."
- David Dittman
Who votes on Fed rate cuts?
The Federal Open Market Committee (FOMC) – the Federal Reserve's policy-setting group – has 12 members, eight permanent and four who rotate each year.
The eight permanent voting committee members include the Fed chair and vice chair, the five Fed governors and the president of the New York Fed.
Four regional Fed presidents are rotated in each calendar year.
The 2025 FOMC voting committee consists of:
- Fed Chair Jerome Powell
- Vice Chair Philip Jefferson
- Fed Governor Michael Barr
- Fed Governor Michelle Bowman
- Fed Governor Lisa Cook
- Fed Governor Adriana Kugler
- Fed Governor Christopher Waller
- New York Fed President John Williams
- Boston Fed President Susan Collins
- Chicago Fed President Austan Goolsbee
- St. Louis Fed President Alberto Musalem
- Kansas City Fed President Jeffrey Schmid
In 2026, the presidents from Cleveland, Philadelphia, Dallas and Minneapolis will rotate in as FOMC voting members, according to the Federal Reserve.
- Karee Venema
Fed officials signal support for a pause
Between the March and May Fed meetings, several Fed officials have signaled support for keeping the federal funds rate at its current range of 4.25% to 4.5%.
Speaking on April 23, Cleveland Fed President Beth Hammack said it is too soon to consider a rate cut in May, but the central bank could move later if there is clear and convincing evidence of a sharp labor market decline.
Hammack added that there remains a very high bar set for emergency rate cuts – the most recent occurred at the onset of the pandemic in March 2020 – and there is not enough of a market or economic breakdown at the moment to support one.
Meanwhile, on April 24, Fed Governor Christopher Waller said he doesn't expect the impact of tariffs to hit until July. However, Waller added that a significant decline in the labor market could encourage a rate cut sooner rather than later.
"To be sure, Fed officials have a strong consensus for not moving in the near term as the economic impact from tariffs is still unfolding and other aspects of the Administration's policies remain to be seen – namely, the upcoming tax bill being debated in Congress," write Deutsche Bank economists.
They anticipate the biggest impact from tariffs – higher inflation and lower growth – to occur in the back half of the year and do not believe the Fed will resume rate cuts until December.
- Karee Venema
What will the April jobs report say about the labor market?
The April jobs report will be released ahead of this Friday's open. It will give Federal Reserve officials the first glimpse of how Trump's retaliatory tariff announcement and reciprocal levies from several U.S. trade partners may impact the hard data.
"Hiring is often delayed when consumers are concerned about losing their jobs, or when businesses don’t know if there will be a positive return to investing in additional workers," writes David Payne in the Kiplinger jobs outlook.
In March, nonfarm payrolls rose by a robust 228,000, while February's jobs growth was upwardly revised.
This time around, Goldman Sachs economists believe the U.S. added a slightly above-consensus 130,000 new jobs in April, which they say reflects "a still-moderate pace of job creation."
The group also expects government payrolls to be unchanged, "as a likely decline in federal government positions offsets increases at the state and local levels.
And they say the unemployment rate stayed at 4.2%.
- Karee Venema
How will the March PCE report impact the Fed's interest rate decision?
In March, both headline PCE and core PCE, which excludes volatile food and energy costs, were flat month over month, a slower pace than what was seen in February.
Year over year, headline PCE rose 2.3%, faster than the 2.1% increase economists expected. Core PCE also came in higher than anticipated, at 2.6%.
The data also showed a sharp uptick in consumer spending (+0.7% in March vs 0.1% in February).
"This inflation report, coupled with this morning's disappointing GDP figures, creates significant pressure on the Federal Reserve ahead of next week's crucial policy meeting," says David Hernandez, crypto investment specialist at 21Shares.
Hernandez adds that while markets have priced in no change to interest rates at the next Fed meeting, "today's mixed economic signals introduce fresh uncertainty into the equation."
According to CME FedWatch, futures traders are currently pricing in a 94% chance the FOMC holds rates steady next Wednesday. The odds for a June rate cut are at 60%.
- Karee Venema
The Fed is unlikely to cut interest rates this time
The Federal Reserve is not likely to change rates at its meeting next Wednesday, despite the modest contraction in first-quarter GDP.
Price and wage data through March have been encouraging, but the Fed is concerned that price increases caused by April tariffs may raise inflation expectations. There has been evidence in consumer sentiment surveys of exactly that.
If the economic contraction gets worse, the Fed could cut rates a quarter point at its June 18 meeting, or the one after that, on July 30.
However, that will be determined by how the Fed weighs the balance of risks between a slowing economy and rising inflation.
- David Payne
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce.
Q1 GDP unexpectedly declines
In its initial estimate of first-quarter gross domestic product (GDP), the Bureau of Economic Analysis said economic growth decreased at an annual rate of 0.3% as imports jumped 41.3%.
If this holds through to the third reading, it will mark the biggest drop in GDP since Q1 2022. Economists expected a 0.4% increase in economic growth.
"The economy weakened in the first quarter," says Bill Adams, chief economist for Comerica Bank. "Businesses and consumers pulled forward purchases to get ahead of tariffs in the first quarter, and throttled back spending and investment plans in other areas."
Adams notes, though, that today's reading doesn't tell us much about the current state of the economy, given all of the announcements and changes that have taken place since the start of the month.
The economist feels the uncertainty will keep the Fed on hold this month, but he says a June rate cut is on the table.
- Karee Venema
With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021, and oversees a wide range of investing coverage, including content focused on equities, fixed income, mutual funds, ETFs, macroeconomics and more.
Can Trump fire Powell?
In addition to upending the global economy with his tariffs, President Donald Trump has introduced additional uncertainty for financial markets by undermining the independence of the Federal Reserve and Fed Chair Jerome Powell in a series of public attacks.
His behavior could render moot whatever the result of a pending Supreme Court review of a 90-year-old case that could answer the question, can Trump fire Powell?
Last week, President Trump called Chair Powell a "major loser" and suggested the Fed cut interest rates last September to help former President Joe Biden.
In Michigan on Tuesday to celebrate the first 100 days of his second administration, the president refreshed his assault.
"Interest rates came down despite the fact that I have a Fed person who's not really doing a good job but I won't say that, I want to be very nice," Trump told his rally crowd.
"I want to be very nice and respectful to the Fed," he continued. "You're not supposed to criticize the Fed, you're supposed to let him do his own thing.
"But," he concluded, "I know much more than he does about interest rates, believe me."
- David Dittman
David is the former managing editor and chief investment strategist of Utility Forecaster and the former editorial director of Investing Daily, Charles Street Research, and Weiss Ratings. A former stockbroker, David has been working in financial media for more than 20 years.