Wall Street Week Ahead
Earnings season heats up as Wall Street eyes inflation data and Fed signals. get ready for a pivotal week in the stock market.
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May 18 2025
With multiple earnings reports on deck from major retail giants and key housing market figures due, this week could prove pivotal for determining the short-term direction of U.S. equities.
What’s Moving Markets This Week
Markets are still digesting Moody’s downgrade of the U.S. credit rating, marking the third major agency to strip the country of its AAA status. The cut to Aa1 reflects concerns over America’s rising debt and fiscal management, and it’s adding to the broader cloud of uncertainty hanging over Wall Street.
Traders will be focused on a string of macroeconomic updates. Housing data takes center stage with April’s existing home sales due Thursday and new home sales Friday. These numbers are expected to highlight continued weakness in the housing market, driven by high mortgage rates and tight inventory. Meanwhile, Thursday’s initial jobless claims will offer insight into labor market conditions, and S&P Global’s PMI report will provide a snapshot of May’s manufacturing and services activity. Any major surprises in these reports could shift expectations for future Fed policy.
Speaking of the Fed, this week features a packed schedule of speeches from central bank officials. Markets are hungry for clues about whether the Fed still sees room for rate cuts in 2025, or if sticky inflation might force a longer hold. Appearances from key names like Vice Chair Philip Jefferson, John Williams, Raphael Bostic, Lorie Logan, and Mary Daly could move markets if they suggest any change in tone.
With inflation cooling only slightly April data showed core CPI up 2.8% year-over-year, while headline CPI ticked down to 2.3% the Fed appears in no rush to declare victory. Rental prices, a major inflation component, remain high, and services inflation excluding rent rose in April, signaling the fight against inflation is far from over.
There’s also some relief on the global trade front. The U.S. and China have temporarily agreed to lower tariffs, with U.S. duties on Chinese imports set at 30%, down from a proposed 145%. China, in turn, will impose a 10% tariff on U.S. goods, far below earlier expectations. While the agreement is limited to 90 days, it eases immediate tensions. Still, the net cost of imports remains elevated, which could keep pressure on inflation and complicate any Fed easing plans.
Economic indicators continue to suggest a slowing recovery. Core retail sales slipped 0.2% in April, industrial production (excluding energy) fell 0.4%, and continuing jobless claims remain high at 1.88 million. Consumer sentiment, as measured by the University of Michigan survey, declined again in May, and inflation expectations jumped to 7.3% a worrying sign. While housing starts rose slightly in April, building permits dropped sharply, and homebuilder sentiment plunged to its lowest level since late 2023.
On the political front, fiscal tensions are brewing. New proposals from Congressional Republicans could add over $3.7 trillion to the national debt over the next decade via tax cuts. These plans arrive just as the country grapples with its downgraded credit status, raising concerns that more stimulus could reignite inflation and tie the Fed’s hands on rates.
In short, markets face a tough balancing act. Persistent inflation, softening economic data, and cautious Fed messaging are keeping equities in check. Hopes for a policy pivot may grow if growth slows further, but the Fed remains in “wait and see” mode. Until a clearer signal emerges, investors should expect range-bound markets and heightened volatility around key data releases.
This week could either reinforce cautious optimism or deepen bearish concerns. With so many moving parts, investors would be wise to stay grounded in the fundamentals, remain selective, and prepare for a market that’s becoming more dependent on economic surprises than broad narratives.
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
