Stock Market Today: Dow, S&P 500, Nasdaq Climb as Fed Holds Rates Steady; Powell Adopts ‘Wait and See’ Stance
May 7, 2025 – In a day marked by cautious optimism, U.S. stock markets closed higher Wednesday amid Federal Reserve policy decisions and anticipation surrounding upcoming U.S.-China trade talks.
Market Summary
On Wednesday, the Dow Jones Industrial Average rose by 0.7%, gaining nearly 300 points, buoyed notably by a 10% surge in Disney (DIS) stock. Meanwhile, the S&P 500 edged up 0.4%, and the tech-focused Nasdaq Composite advanced about 0.3%. The market gains came despite a 7% drop in Alphabet’s (GOOGL, GOOG) shares, which tempered Nasdaq’s overall performance.
Federal Reserve Holds Interest Rates Steady
In its May meeting, the Federal Reserve opted to keep benchmark interest rates unchanged, maintaining the target range at 4.25% to 4.5% for the third consecutive time. The central bank’s statement highlighted escalating risks related to higher unemployment and inflation, signaling elevated economic uncertainty.
Federal Reserve Chair Jerome Powell emphasized a cautious approach toward future interest rate adjustments. He stated that the Fed was not in a “hurry” to cut rates and preferred to "wait and see" how tariffs and other economic factors would impact the economy moving forward.
“My gut tells me that uncertainty about the path of the economy is extremely elevated and that the downside risks have increased,” Powell said. He also noted the Fed is weighing various scenarios, saying, “There are cases in which it would be appropriate for us to cut rates this year, and there are cases in which it wouldn’t. We just don’t know.”
Trade Talks Between U.S. and China Stir Market Sentiment
Investors also digested the news of planned U.S.-China trade negotiations set for the weekend—the first major talks since the April imposition of a significant tariff hike by the Trump administration. Market participants have held tentative faith that negotiations could eventually lead to a resolution despite tempered expectations for a major breakthrough in Geneva.
During a Wednesday press conference, President Donald Trump firmly ruled out lowering tariffs on Chinese goods to facilitate talks, saying a reduction was “no” in response to queries about fostering more productive discussions.
Notable Stock Movers
-
Disney (DIS): The entertainment giant’s shares jumped 10%, contributing substantially to gains on the Dow.
-
Alphabet (GOOGL, GOOG): Despite sector-wide momentum, Alphabet’s shares fell sharply by 7%, impacting Nasdaq’s performance.
-
Nvidia (NVDA): Following a Bloomberg report that AI chip export restrictions implemented under the Biden administration could be reversed by the Trump administration, Nvidia shares rose more than 3%. The Republican-led effort aims to repeal the so-called AI Diffusion rule that would have limited AI chip exports and constrained the expansion of U.S. firms’ AI data centers abroad.
Looking Ahead
Investors remain cautiously optimistic as the Federal Reserve holds steady, balancing inflation concerns and economic growth risks, while the outcome of imminent U.S.-China trade talks remains uncertain. Powell’s “wait and see” approach reflects the Fed’s readiness to adapt policy based on evolving economic conditions.
Market watchers will closely monitor developments from the Geneva talks and upcoming economic data releases for clues on the next moves from policymakers and markets alike.
For more detailed analysis and ongoing updates on financial markets, visit Smart Money Mindset.