Stock Market Today: Stocks edge lower as Fed rally fades amid tariff risks

U.S. equity futures edged lower in early Thursday trading, while Treasury bonds steadied and the dollar held onto recent gains, as investors parsed a surprisingly dovish Federal Reserve rate decision while cautiously eyeing changes to President Donald Trump's tariff plans over the coming weeks.

Stocks ended firmly higher again on Wednesday, with the S&P 500 rising just over 1% and the Nasdaq gaining 1.4%, after the Fed left its key lending rate unchanged at 4.375% but held to its forecast of two more rate cuts over the coming year and hinted that the impact of trade tariffs may not stoke longer-term inflation pressures.

"It can be the case that it’s appropriate sometimes to look through inflation [caused by tariff price increases] if it’s going to go away quickly without action by us if it’s transitory and that can be the case in the case of tariff inflation," Powell told reporters in Washington.

"I think that will depend on the tariff inflation moving through fairly quickly and will depend critically as well on inflation expectations being well anchored—longer-term inflation expectations being well anchored," he added.

His remarks sparked a rally in U.S. Treasury bonds, dragging 2-year note yields 10 basis points lower on the session and powering broader equity market gains, even as Fed officials boosted their outlook for PCE inflation and lowered their 2025 GDP growth forecasts. 

The tone of Powell's question and answer session with the media, however, was measured and the outlook for 2025 rate cuts remained unchanged, suggesting the Fed is willing to wait and gauge the impact of so-called reciprocal tariffs, which are slated to be announced on April 2, will have on the world's biggest economy.

Related: Fed delivers big inflation surprise even as it holds rates steady

Multiple media reports now suggest the White House is preparing those levies on trillions worth of goods from the biggest U.S. trading partners, on top of tariffs on Canada and Mexico that were delayed earlier this month. 

That's likely to bleed into stock market sentiment throughout today's session, particularly if today's weekly jobless claims data at 8:30 am Eastern time shows a spike in new applications tied to President Trump's DOGE effort to trim the federal workforce.

The elevated uncertainty, which was referenced by Powell on fourteen different occasions during his press conference, lifted gold to its third consecutive all-time high, with the bullion hitting $3,057.21 per ounce in overnight trading.

Perhaps sensing that impact, President Trump pushed his case for a Fed rate cut through a post on his Truth Social media network late Wednesday.

Trump nudges Federal Reserve to cut interest rates ahead of reciprocal tariffs kicking in in two weeks. Fed left rates unchanged Wednesday and Chair Jerome Powell said Inflation has started to move up partly in response to tariffs.
Trump has said he doesn't see himself replacing… pic.twitter.com/eYzSQ0GGZw— Jennifer Jacobs (@JenniferJJacobs) March 20, 2025

Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 suggest a modestly opening bell dip of around 5 points, with the Dow Jones Industrial Average called 15 points lower

The tech-focused Nasdaq, meanwhile, is priced for a 33 point decline with Tesla  (TSLA) , Nvidia  (NVDA)  and Palantir  (PLTR)  the most active names in premarket trading. 

Investors will also look to a busy slate of after-hours earnings with updates expected from Nike  (NKE) , Micron Technology  (MU)  and FedEx  (FDX)  after the close of trading.

More Wall Street Analysis:

• Analyst resets Tesla stock price target tied to 'shocking' catalyst
• Analyst revamps Palantir stock price target after slump
• Analysts turn heads with Nvidia stock price target move

In overseas markets, Britain's FTSE 100 was marked 0.22% lower in London, with the pound trading at a five-month high against the U.S. dollar, ahead of today's Bank of England rate decision in London, expected at 8:00 am Eastern time.

Europe's benchmark Stoxx 600, meanwhile, slipped 0.46% in mid-day trading in Frankfurt.

Overnight in Asia, the regional MSCI ex-Japan benchmark edged 0.18% lower while the Nikkei 225 in Tokyo remained closed for the country's annual Vernal Equinox celebrations. 

Related: Veteran fund manager unveils eye-popping S&P 500 forecast