This Week in the Stock Market: Lingering Trade Tensions Could Keep Things Interesting

Photo by Lidia Nikiforova

Welcome to Markets on Monday, where we preview what’s going on in the stock market this week.

At the start of last week, the S&P 500 took the biggest tumble it had since January, only to mostly recoup those losses by week’s end. But then came news trade talks have stalled between the U.S. and China.

This ongoing trade spat is to blame for much of the market’s bumpiness this month. Each of the two countries raised tariffs on the other’s goods in recent weeks.

While uncertainty surrounding a possible deal lingers, investors are keen for some good news—like a report Friday showing confidence among U.S. consumers about the economy and their own financial situations is the highest it’s been in 15 years.

This week, investors will get details from the most recent meeting of Federal Reserve policymakers, along with a few reports about the U.S. housing market. Here’s what’s happening and what it could mean for you.

What is the Fed’s interest rate plan?

The Federal Reserve’s Open Market Committee meets eight times a year, and investors closely track those details to get a sense of where interest rates might be headed. On Wednesday, we’ll get a look at the minutes from the committee’s most recent meeting. Folks on Wall Street will analyze every word, including how language has changed from prior meetings.

The Fed has said it doesn’t plan to increase interest rates this year, and investors increasingly expect that policymakers could lower rates. They’re even betting there’s about a 25% chance the Fed will cut rates by July, and the odds of this happening by year’s end are at more than 70%. This would be significant because the Fed hasn’t cut interest rates since 2008—and it’s a move they usually make to stimulate economic growth. Lowering interest rates would make it cheaper for consumers to borrow money, but savers will see their rates fall, too.

The Fed doesn’t meet again until mid-June, but investors try to predict its next move, so they’ll be looking for any hint of a shift in policy.

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A check-in on the housing market

Americans are quite optimistic about the economy, according to a survey from the University of Michigan released last week. It was mostly conducted before U.S.-China trade tensions heated up, though.

In less cheering consumer news, a separate report last week showed that Americans cut back on spending in April.

The housing market is perhaps one of the best gauges of confidence, because consumers need to feel optimistic about their financial situations to justify such a big expense. This week, we’ll see monthly reports on sales of both new and existing homes, and weekly numbers on mortgage applications.

Recent reports on the housing industry have been mixed. There are some signs the market is cooling, but there has also been a rebound in sales that’s made homebuilders more optimistic. Investors are also eyeing a wave of potential millennial homebuyers.

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