Market Wrap-Up, May 8, 2025

May 8, 2025 | , , , , , , ,

Year-to-Date Returns (as of May 7th, 1 pm, 2025)

  • S&P 500: –4.39%​
  • Nasdaq Composite: -8.53%​
  • Dow Jones Industrial Average: -3.24%​
  • S&P 500 Equally Weighted: -2.2%
  • Russell 2000 (Small Cap Index): -10.55%​
  • Gold: +26.21%​
  • Key Economic Data This Week:
  • Initial Jobless Claims: 241k (vs 223k Expected)
  • Continuous Claims: 1916k (vs 1865k Expected)
  • Change in Non-Farm Payroll: 177k (vs 138 Expected)
  • Unemployment Rate: 4.2% (vs 4.2% Expected)
  • MBA Mortgage Application Rate 11% (vs -4.2% Prior)
  • FOMC Rate Decision Upper Bound: 4.50% (vs 4.50% Expected)
  • FOMC Rate Decision Lower Bound: 4.25% (vs 4.25% Expected)

The Federal Reserve Holds its ground:

The Federal Reserve announced on Wednesday that it will leave interest rates unchanged, amid rising prices and weakening economic growth. Consumers are struggling under the burden of high prices and elevated borrowing costs, with little relief in sight.

The federal funds rate is not only the rate banks charge each other for overnight lending but also has a cascading effect on nearly all of the borrowing and savings rates that effect most consumers.

Here are five ways the Fed rate affects your spending:

  1. Credit Cards:  Many credit cards have a variable rate, making them directly connected to the Fed’s benchmark. With a rate cut likely postponed until at July, credit card annual percentage rates (APRs) have remained above 20% this year, not far from the all-time high of 2024.  Simultaneously, more people are carrying debt due to higher prices.
  2. Mortgages: Mortgage rates do not directly follow the Fed’s actions but are largely tied to Treasury yields economic conditions.  Therefore, uncertainty over tariff and concerns about a potential recession are slightly dragging those rates down.
  3. Auto loans: Auto loan rates are influenced by several factors, with the Fed being one of the most significant.  With the Fed’s benchmark holding steady, the average rate on a five-year new car loan was 7.1% in April, while the average for used cars is 10.9%. With interest rates near historical highs and car prices rising, along with pressure from a 25% tariff on imported vehicles, new car shoppers are facing larger monthly payments and an affordability crunch.
  4. Student loans: Federal student loans are fixed for the life of the loan, so current borrowers are shielded from Fed rate changes and recent market volatility. Interest rates for the upcoming school year will be partially based on the May auction of the 10-year Treasury note and are expected to drop slightly.
  5. Savings:  While high interest rates can be discouraging for those in debt, they are advantageous for savers.  Money market accounts and CDs continue to offer rates above the annual inflation rate.

Conclusion:

The economy presents mixed signals and tariff uncertainties, causing turbulence in the market. Market fluctuations have been more influenced by news headlines and “what ifs” rather than actual data. Earning reports have been varied; companies like Microsoft have exceeding expectations, while Apple has disappointed Wall Street. The Fed remains uncertain about its next moves, and consumer confidence continues to decline. We have adopted a defensive stance in our portfolios while looking for potential opportunities.

Have a great weekend.

Your Omnistar Investment Team

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