May 9, 2025, Weekly Stock Market Return Recap, by Kip Lytel CFA, Montecito Capital Management. After consecutive weekly gains, U.S. stocks experienced a general decline this week as investors faced uncertainty regarding Federal Reserve policies and ongoing global trade negotiations. The S&P 500 fell by 0.5% over the week, while the Dow Jones decreased by 0.2%, and the Nasdaq Composite also ended the week lower with a 0.3% drop. On Wednesday, the Federal Reserve decided to maintain its key interest rate as it awaits the development of the Trump administration's trade policies and their effects on a struggling economy. In a decision that was largely anticipated given the prevailing uncertainty in the political and economic environment, the FOMC kept its benchmark overnight borrowing rate steady at a range of 4.25%-4.5%, unchanged since December. The Fed remarked, 'Uncertainty regarding the economic outlook has further increased' and 'The Committee is mindful of the risks associated with both aspects of its dual mandate and assesses that the risks of rising unemployment and inflation have escalated.' During its previous meeting in March 2025, the Fed maintained the key benchmark lending rate at 4.25% to 4.50%, while indicating the potential for two cuts of 25 basis points before the year's end.
May 2, 2025, Weekly Stock Market Return Recap, by Kip Lytel CFA, Montecito Capital Management. In the wake of a steep decline during the first week of April, the S&P 500 mounted a vigorous recovery, driven by news of a 90-day pause in the implementation of tariffs. By the close of the weekend on May 2, 2025, the S&P 500 had achieved a 2.9% return, marking its ninth consecutive day of gains, the longest such streak since 2004. However, the S&P 500 still finished the month down 0.7%, with 10 of the 17 factor indices we monitor underperforming relative to the U.S. benchmark. Pure Growth was the best performer among these indices, rising by 2.6%, while High Dividend lagged with a decline of 5.6%. Additionally, this week, we learned that the U.S. GDP contracted at an annualized quarterly rate of -0.3%, ending a 10-quarter period of strong economic growth. Nonetheless, this appears to be more of a temporary fluctuation than a lasting trend. A detailed review of the report indicates that a significant increase in imports, as U.S. firms anticipated tariffs, detracted five percentage points from growth.