The S&P 500 Index ($SPX) (SPY) closed up +0.43% on Wednesday, along with the Dow Jones Industrials Index ($DOWI) (DIA) which rose +0.70%. The Nasdaq 100 Index ($IUXX) (QQQ) also saw an increase of +0.39%. Additionally, June E-mini S&P futures (ESM25) grew by +0.36%, while June E-mini Nasdaq futures (NQM25) climbed by +0.40%.

After the Federal Open Market Committee (FOMC) kept interest rates steady, stock indexes settled moderately higher amidst a volatile trading day. Stocks initially fluctuated as traders reacted to the Fed’s decision. However, an afternoon rally in chip manufacturers boosted the broader market following reports that the Trump administration intends to rescind AI chip restrictions from the Biden era as part of a strategy to alleviate semiconductor trade barriers.

Markets found additional support from easing tensions in US-China trade relations. Representatives from both nations are set to meet for their first trade discussions since the imposition of tariffs by President Trump. US Treasury Secretary Bessent and US Trade Representative Greer will travel to Switzerland this weekend to negotiate with Chinese Vice Premier He Lifeng. Bessent indicated that these talks aim to address the ongoing tariff standoff, asserting that current tariff rates resemble an economic embargo.

Despite this progress, stock gains were somewhat limited due to comments from President Trump. He stated that he is not inclined to reduce tariffs on China preemptively to facilitate more meaningful negotiations.

In line with expectations, the FOMC maintained the fed funds target range at 4.25%-4.50%. The committee acknowledged an increase in economic uncertainty, recognizing elevated risks of both high unemployment and inflation. They noted that while economic activity is expanding “at a solid pace,” inflation remains “somewhat elevated.”

Stock prices briefly increased after Fed Chair Powell affirmed that the US economy remains resilient. However, the boost was muted when he commented, “I don’t think we need to be in a hurry to adjust interest rates,” emphasizing that the Fed plans to await clearer trade policy signals, especially since higher tariffs could exacerbate inflation and unemployment.

In economic data, US consumer credit for March gained +$10.172 billion, exceeding the forecast of +$9.387 billion. Meanwhile, US mortgage applications rose by +11.0% for the week ending May 2, with both the purchase and refinancing indices increasing by +11.1%. The average 30-year fixed mortgage rate fell slightly, from 6.89% to 6.84%.

The People’s Bank of China (PBOC) implemented several easing measures to enhance liquidity and stimulate economic growth. These included a reduction of the seven-day reverse repo rate by -10 basis points to 1.4% and a cut in the reserve requirement ratio for major banks by -50 basis points to 9.0%.

Subsequently, the market is closely monitoring developments related to tariffs and US trade policy. Upcoming reports this Thursday include initial unemployment claims and first-quarter non-farm productivity, which is expected to show a +0.7% change, along with unit labor costs expected to rise by +5.2%.

Currently, markets are pricing in a 23% probability for a -25 basis point rate cut by the FOMC at the June 17-18 meeting.

During this ongoing earnings season, consensus estimates suggest that S&P 500 corporations will see a +6.7% year-over-year earnings growth for Q1, a decrease from a prior estimate of +11.1%. So far, 78% of the 365 S&P 500 companies that have reported results have exceeded earnings expectations. Looking ahead, full-year corporate profit projections for the S&P 500 are now expected to rise by +9.4%, adjusted down from earlier predictions of +12.5%.

International markets displayed mixed results on Wednesday. The Euro Stoxx 50 fell by -0.63%, while China’s Shanghai Composite surged to a one-month high, closing up +0.80%. Japan’s Nikkei 225 ended the day down -0.14%.

Interest Rates

June 10-year T-notes (ZNM25) posted gains, closing up +7.5 ticks. The 10-year Treasury note yield declined by -2.2 basis points to 4.273%. T-note prices found support after early losses, aided by stronger European government bond prices and demand for longer-term Treasuries following comments from Fed Chair Powell about the Fed’s cautious stance on rate adjustments.

Initially, T-note prices decreased due to diminished safe-haven demand, bolstered by stronger stock markets from US-China trade discussions. The FOMC’s updates, indicating ongoing economic expansion, were perceived as bearish for T-notes, affirming a “solid pace” of growth and slightly elevated inflation.

European bond markets saw yields decrease on Wednesday, with the 10-year German bund yield dropping -6.5 basis points to 2.475% and the 10-year UK gilt yield falling -5.4 basis points to 4.460%.

In the Eurozone, March retail sales fell by -0.1% month-over-month, aligning with expectations and marking the first decline in five months. Conversely, German March factory orders registered a +3.6% month-over-month rise, surpassing forecasts of +1.3%.

Market predictions indicate a 96% likelihood of a -25 basis point rate cut by the European Central Bank at the June 5 policy meeting.

US Stock Movers

Chip stocks significantly contributed to broader market gains on Wednesday. Notable performers included Nvidia (NVDA), Qualcomm (QCOM), and ASML Holding NV (ASML), each rising by over +3%. Other companies such as Micron Technology (MU), Lam Research (LRCX), and Broadcom (AVGO) also increased by more than +2%. Advanced Micro Devices (AMD), Intel (INTC), and Microchip Technology (MCHP) added over +1% to their stock values.

Leading the S&P 500 gainers, Charles River Laboratories (CRL) surged by over +18% following the announcement of a strategic review aimed at enhancing long-term shareholder value and its partnership with Elliot Investment Management.

Oscar Health (OSCR) jumped more than +30% after revealing Q1 total revenue of $3.05 billion, significantly surpassing the consensus estimate of $2.86 billion.

Rockwell Automation (ROK) saw an increase of over +11% after reporting Q2 adjusted EPS of $2.45, exceeding the consensus of $2.08. The company also raised its full-year adjusted EPS forecast to a range of $9.20-$10.20, above the consensus expectation of $9.18.

Walt Disney (DIS) gained more than +10%, leading the Dow Jones industrials following its Q2 adjusted EPS announcement of $1.45, surpassing expectations of $1.20, and forecasting 2025 adjusted EPS of $5.75, above a consensus of $5.44.

Gen Digital (GEN) rose by over +8% after reporting Q1 revenue of $1.01 billion, outpacing the consensus estimate of $998 million, and suggesting Q1 adjusted revenue of between $1.18 billion and $1.21 billion, above the consensus of $1.02 billion.

CDW Corp (CDW) led gains in the Nasdaq 100, closing up more than +7% after reporting Q1 net sales of $5.20 billion, exceeding the expected $4.94 billion.