Stocks Slide as the Fed Holds Rates and the Bank of England Prepares for Action
- NexxtGen Markets
- 6 days ago
- 5 min read
Market Overview: Stock futures gained after the S&P 500 posted its first gain in three sessions, with the index rising +0.43%. The Dow Jones added +0.70%, while the Nasdaq saw a smaller uptick of +0.27%. On the other hand, the Federal Reserve held rates steady at 4.25%-4.5%, citing concerns over inflation and unemployment as trade tensions with China persist.
Key Earnings Moves:
Axon (AXON): +5% following a strong earnings report, beating both revenue and earnings per share (EPS) expectations.
Bumble (BMBL): +7%, despite flat user growth and Q2 revenue guidance falling short of expectations.
Zillow (ZG/Z): -5% after issuing a cautious housing outlook, despite positive Q1 profits.
Fed’s Impact on Earnings: 73% of S&P 500 firms have exceeded Q1 earnings estimates. However, caution remains in guidance, especially with ongoing tariff concerns.
Market Movers:
Skechers (SKX): +24% after 3G Capital's $9B buyout offer, a 30% premium to the stock's previous closing price.
BioCryst Pharmaceuticals (BCRX): +24% on a strong earnings beat.
Lyft (LYFT): +4% as it maintains positive sentiment despite tariff concerns.
ON Semiconductor (ON): -8% after disappointing results and weak guidance.
News Highlights
Focus on Consumer Stocks:Today’s earnings reports include heavyweights like Crocs, Shopify, Peloton, and Krispy Kreme. Investors will closely monitor the impact of tariffs and consumer demand trends, with expectations of mixed results across these companies.
Crocs is expected to report a decline in Q1 revenue by 3.1%, with EPS of $2.49. The company faces challenges from declining demand and tariff pressures. Key updates investors are looking for include performance from the HEYDUDE brand and international sales growth.
Shopify is expected to show strong results with a 31% increase in profits and 25% revenue growth, despite valuation concerns that keep its Quant Rating at "Hold". Wall Street, however, remains bullish on the stock.
Peloton projects a 13.4% YoY drop in Q1 revenue, with the company narrowing its net loss. The new CEO’s focus on growing subscriptions and improving the software offerings is a key point of interest.
Krispy Kreme forecasts a 13.3% decline in Q1 revenue, with an EPS loss of $0.05, as it recovers from a recent cyberattack and aims to boost sales via major retail partnerships.
The Fed’s Latest Decision:The Federal Reserve decided to keep interest rates unchanged at 4.25%-4.5%, amid concerns over inflation and unemployment exacerbated by President Trump’s aggressive tariffs. Fed Chair Jerome Powell emphasized a wait-and-see approach, ruling out preemptive rate cuts for now. He warned that tariffs could delay the Fed’s long-term goals for another year, which will likely have broader implications on market stability and investor sentiment.
Market Impact:
Stocks: Market sentiment remains cautious, particularly for growth and multinational stocks, while more defensive sectors are finding short-term support.
Bonds: Treasuries saw increased demand, with short-duration debt proving particularly attractive.
Gold: As a hedge against inflation and Fed inaction, gold extended its gains, reinforcing its safe-haven status.
US Dollar: The dollar remained stable ahead of the Fed’s decision, but may weaken if Powell signals a shift toward easing in the near future.
It’s the Bank of England’s Turn
The Bank of England (BoE) is widely expected to announce a 25-basis point rate cut today, lowering rates to 4.25%. While the market has anticipated more aggressive cuts, current economic data suggests that the BoE might proceed with a slower quarterly easing cycle. Nevertheless, as energy prices ease and services inflation declines, the rate could fall further than expected, with some forecasts suggesting a drop to around 3.25% by 2026.
What This Means for the Market:
GBP pairs: Lower rates could put pressure on the British pound, with GBP/USD and GBP/EUR potentially seeing downside.
UK Equities: Rate-sensitive sectors like homebuilders, utilities, and REITs could benefit from easing policies.
Gilts: Bond prices may rise as rate expectations fall, with short-dated gilts likely outperforming.
Bank Stocks: UK financials could face pressure, with falling rates potentially squeezing margins.
ETH Upgrade Success, But Modest Price Impact
The Ethereum network's long-awaited upgrade, Pectra, has been successfully executed today. This update brings key improvements to staking, wallet usability, and blockchain efficiency. Despite these technical advancements, Ethereum’s price response has been relatively subdued, rising only 2.7% post-upgrade to around $1,822, still well below its all-time high.
Analysts suggest that while the upgrade bolsters Ethereum's infrastructure, it doesn’t directly address competitive threats from faster, lower-cost blockchains like Solana. As a result, the price movement has been modest, with traders awaiting further adoption and technological advancements before significant price action occurs.
Movers & Shakers
Nvidia (NVDA): +3.10% after reports suggesting that the US may relax chip export restrictions to China. This news boosted sentiment in the semiconductor sector, with Nvidia highlighted as a key beneficiary of global demand for AI-driven products.
AppLovin (APP): -0.38%, despite crushing Q1 earnings expectations with $1.67 EPS vs. the $1.45 forecast. The company also announced the divestment of its mobile gaming unit to Tripledot Studios for $400 million, re-focusing on its core AI-powered ad tech business.
Arm Holdings (ARM): +1.43% despite issuing weaker-than-expected guidance for Q1, with analysts disappointed by cautious outlooks regarding chip demand and pricing pressures. The company still posted solid Q4 earnings but faces challenges in the competitive semiconductor market.
Skyworks Solutions (SWKS): +1.32% after beating Q2 estimates with $1.24 EPS and $953M in revenue. However, investors remain cautious due to sector-wide uncertainty and ongoing headwinds in the chip market.
Coming Up Today:
12:00 PM GMT: BoE Rate Decision – The Bank of England is expected to cut rates to 4.25%. Watch for potential market reactions in GBP pairs.
1:30 PM (US time): Jobless Claims (May 3) – Key labor data expected. Watch: US indices and USD pairs for market impact.
What to Watch:
Google vs. Apple: After Apple’s move to integrate AI search tools into Safari, Google shares dropped 7.5%. Apple’s potential disruption of Google’s $20B search deal could reshape the search engine market.
Healthcare Stocks Slide: Fears of drug pricing reforms and potential budget cuts have pressured the healthcare sector, with companies like Sarepta and Moderna seeing losses.
Nvidia in Focus: Geopolitical tensions regarding US-China relations in the semiconductor sector remain high. While Nvidia’s shares rose this week, they’re still significantly off their January highs.
Maersk Earnings: Shipping giant Maersk posted a 70% jump in Q1 EBITDA to $2.71B, beating forecasts. However, global trade disruptions and trade tariffs continue to cloud the outlook.
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