S&P500

Update on US market: pullback ahead of the Fed's policy meeting

Snapshot of major US stock indexes on Tuesday:

• Dow -1%,
• NASDAQ -0.9%,
• S&P 500 -0.8%,
• S&P 500 at 5,606, trading within the range of 5,150 to 5,800 range.

The stock market came under selling pressure for the second session in a row. The S&P 500 fell 0.8%, and the Nasdaq Composite declined 0.9%. Efforts to consolidate were among the key drivers of today's trading. Renewed tariff concerns and cautious corporate outlooks also weighed on sentiment.

Ford (F 10.44, +0.27, +2.7%) and Mattel (MAT 16.65, +0.45, +2.8%), both of which reported first-quarter earnings above consensus, refrained from providing full-year guidance. Ford warned that tariffs could cut its profits by $1.5 billion, while Mattel cited an unstable macroeconomic environment and announced plans to raise toy prices.

President Trump announced upcoming pharmaceutical tariffs, expected to be detailed within two weeks. This comes amid a US trade deficit of $140.5 billion in March, driven by a preemptive import surge, including a $20.9 billion increase in pharmaceutical imports.

Treasury Secretary Bessent stated during oversight hearings on Capitol Hill that some trade deals may be announced as early as this week and that up to 90% of deals could be completed by year-end. However, markets showed little reaction. Investors are also closely watching the upcoming Federal Reserve policy announcement for insights into inflation and growth risks related to tariffs.

The FOMC decision for May is scheduled for Wednesday at 2:00 p.m. ET.

Treasuries ended higher, with the 10-year yield falling 4 basis points to 4.31%, and the 2-year yield dropping 5 basis points to 3.79%.

Year-to-date performance:

• Dow Jones Industrial Average: -4.0%
• S&P 500: -4.7%
• S&P Midcap 400: -6.9%
• Nasdaq Composite: -8.4%
• Russell 2000: -11.1%

Economic data review

The trade deficit widened to a record $140.5 billion in March (consensus: -$127.5B) from a downwardly revised $123.2 billion in February (previously -$122.7B).

The expansion was driven by a $0.5 billion increase in exports and a sharp $17.8 billion increase in imports, largely due to a $22.5 billion jump in consumer goods, including a $20.9 billion surge in pharmaceutical imports ahead of Trump's tariffs.

The main takeaway: the spike in imports weighed heavily on Q1 GDP.

Looking ahead to Wednesday, market participants await the following:

• 7:00 a.m. ET: MBA Weekly Mortgage Applications (previous: -4.2%)
• 10:30 a.m. ET: Weekly Crude Oil Inventories (previous: -2.696 million)
• 3:00 p.m. ET: March Consumer Credit (consensus: $11.0B; previous: -$0.8B)

Investors are also watching the Fed's upcoming policy decision, with expectations that rates will remain steady between 4.25% and 4.50%, and speculation about possible rate cuts later this year, a supportive factor for gold.

Gold rose to $3,436 yesterday.

Energy: Brent oil is trading at $62.80 a barrel.

Conclusion The US market may recover, but today everything hinges on the wording of the Fed's decision.