Tariffs, Tension & Tech: A Flat Market Faces Global Crosswinds

Market Overview

Despite a shortened trading week, markets experienced a rollercoaster of sentiment driven by escalating geopolitical risks, mixed economic data, and central bank policy decisions. The S&P 500 ended the week nearly flat (-0.1%), while the Dow hovered unchanged and the Nasdaq posted minimal gains.

Volatility stemmed largely from headlines around the Israel-Iran conflict and U.S. leadership's assertive rhetoric. Energy (+1.1%), Technology (+0.9%), and Financials (+0.8%) led sector gains, benefiting from rising oil prices and defensive positioning. Health Care (-2.6%) and Communication Services (-1.7%) dragged the index down, with regulatory noise and underperformance from megacaps adding to the pressure.

Retail sales data came in notably weak (-0.9% m/m), hitting Consumer Discretionary (-0.7%), while Housing Starts plunged 9.8% m/m — their lowest since May 2020.

Federal Reserve Insights & Economic Roundup

As expected, the Federal Reserve held its target rate steady at 4.25%–4.50%. The latest Summary of Economic Projections revealed a higher forecast for inflation (core PCE up to 3.1% for 2025) and unemployment, while GDP growth expectations were revised downward. Still, the Fed’s base case continues to assume two rate cuts by year-end.

Fed Chair Powell reiterated a "wait-and-see" approach, citing labor market resilience and anticipated tariff-driven inflation. Yet, remarks from Fed Governor Waller hinted at potential easing as early as July — although futures pricing only nudged the odds of a cut from 12.5% to 14.5%.

Treasury yields dipped across the curve, and investors began questioning whether the margin squeeze from tariffs could start weighing more heavily on corporate profitability

The Week Ahead: At a Glance

Monday: Fed speakers and housing data kick off the week; earnings from FactSet and KB Home in focus.

Tuesday: Consumer Confidence, home price indexes, and more Fed talk headline; FedEx and Carnival report earnings.

Wednesday: New Home Sales, oil inventories, and mortgage data provide a midweek check on housing and energy trends.

Thursday: GDP (Q1) revision, Durable Goods, jobless claims, and pending home sales dominate a data-heavy day.

Friday: All eyes on PCE inflation, personal spending, and consumer sentiment for clues on the Fed’s next move.