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Last Week on Wall Street – March 21st, 2025

  S&P 500: 0.36%      DOW:  1.14%       NASDAQ:  0.46%      10-YR Yield: 4.25%

What Happened?

This week, Wall Street finally caught its breath but remained on edge as volatility persisted. Markets experienced a mix of gains and losses, with investors carefully navigating the lead-up to and aftermath of the Federal Reserve’s March FOMC meeting. The Fed struck a less hawkish tone than many had feared, choosing to keep interest rates unchanged and announcing a plan to lower the monthly cap on balance sheet runoff. This move is intended to support liquidity by slowing the pace at which the Fed reduces its bond holdings, keeping bond prices elevated and supporting financial conditions.

Despite the Fed’s more accommodative stance, cautious sentiment remained across some segments of the market. The Housing Market Index (HMI) revealed a continued dip in homebuilder confidence, reinforcing concerns that consumers anticipate a significant slowdown later this year. This sentiment has been amplified by lingering uncertainty over potential tariffs proposed during the Trump administration, which, while repeatedly delayed, are still factored into forward-looking market valuations.

Further contributing to the cautious mood were weaker signals from consumer and producer-related data. Retail sales data hinted at softening consumer spending patterns, while the drop in prospective homebuyer traffic from the latest homebuilder survey pointed to waning demand in the housing sector. Together, these data points stoked concerns of slowing momentum in the broader economy.

Adding to the mixed signals, corporate earnings from key sectors came in with both positive surprises and disappointments, reflecting a fragmented landscape where certain industries, like tech, are showing resilience while others, such as consumer discretionary and housing-related sectors, are feeling the weight of tighter financial conditions and shifting consumer habits.

Looking ahead, market participants remain highly attuned to upcoming inflation readings and employment data, which could help shape expectations for the Fed’s next move. While the Fed’s stance this week provided temporary relief, traders and analysts are still watching for clearer evidence of either a soft landing or further economic weakening before adjusting their positions with confidence.

In the sections below, we take a closer look at the Fed’s latest policy decision, the persistent decline in consumer and producer sentiment, and what recent data on retail sales and the housing market could mean for the economic outlook in the months ahead.

Federal Open Market Committee

  • Lowered 2025 GDP growth from 2.1% to 1.7%. 
  • Increased outlook on inflation from 2.5% – 2.7%. 
  • Fed will wait to impose any slack on interest rates until after Trump’s tariff implementations in April.

The key takeaway – The long-anticipated Federal Open Market Committee (FOMC)
meeting took place this week, bringing heightened attention to revised
forecasts that reflected both slowing growth and rising inflation over just a
three-month span. Despite the evolving economic backdrop and increased
uncertainty, partly driven by recent trade policies and impending tariffs from
the Trump administration, the Federal Reserve chose to hold the federal funds
rate steady within its current target range. With markets awaiting further clarity
on tariff implementation in early April, the Fed remained cautious but did
adjust its broader economic outlook. Director Jerome Powell remains adamant to wait for further empirical evidence for the slowdown of the general economy, rather than sentiment feared from consumers and investors alike. The Fed came out less hawkish as many analysts were anticipating, with investors still predicting two cuts in 2025.

While some may view the combination of higher inflation and
slower growth as a warning sign, the Fed’s simultaneous decision to slow the
pace of its balance sheet runoff offered a boost to investor sentiment. By
lowering the monthly cap on Treasury redemptions starting in April, the Fed
signaled a more supportive stance, helping to sustain liquidity and stabilize
market conditions. This move reassured markets and bolstered confidence in the
near-term economic environment, mitigating fears of tighter financial
conditions.

Retail sales came in weaker than expected, another bad sign for the US economy 

  • Retail sales grew a modest .2%, short of .6% expectations.
  • Following a revised 1.2% decline in January.
  • Automotive dealerships increased .4%.
  • Online retailers increase sales by 2.4%.

The key takeaway – The latest retail sales report highlights rising consumer caution, with a clear slowdown in spending. Analysts largely attribute this to looming tariff threats and consumer confidence sitting at a two-and-a-half-year low. If this trend persists, it could signal a broader economic deceleration, prompting policymakers – particularly the Federal Reserve – to closely monitor conditions in the coming months. For now, both the Fed and President Trump appear at a crossroads. Fed Chair Jerome Powell, following the most recent FOMC meeting, has opted to keep interest rates elevated, signaling that the Fed will wait for more definitive signs of economic weakness before adjusting policy. President Trump, however, has urged the Fed to begin cutting rates in an effort to stimulate growth ahead of his blanket tariffs on Mexico and Canada, two of the U.S.’s largest trade partners and key suppliers of consumer goods.


However, not all data was negative. The “Control Group”, a core retail sales measure that feeds directly into GDP calculations, rose by a stronger-than-expected 1%. This group excludes volatile categories such as gasoline, autos, building materials, and restaurants, and its solid performance suggests that consumer spending may not weigh as heavily on the economy as many analysts feared.


Much remains uncertain, especially with the Trump administration’s tariff plan set to take effect on April 2nd the extent of the potential drag on GDP growth remains unclear. For now, the data paints a picture of an economy that is still expanding, but with increasing caution and heightened sensitivity to policy decisions ahead.

Market Index (HMI) & Homebuilder’s confidence

  • Current sales conditions fell three points to 43.
  • Sales expectations in the next six months held steady at 47.
  • Traffic of prospective buyers dropped five points to 24.

The key takeaway – Home builder confidence came in slightly below expectations this month, with the Housing Market Index (HMI) reading at 39, compared to forecasts of 42. The HMI is a composite measure based on three key components:

1. Present sales of new single-family homes
2. Expected sales of new single-family homes over the next six months
3. Traffic of prospective buyers for new single-family homes

This index reflects home builders’ collective outlook on the housing market. It is widely regarded as a useful gauge for analysts assessing the consumer sector, the broader impacts of inflation, and potential economic trends. An HMI score of 50 or higher indicates overall optimism among builders, while a reading below 50 reflects a more pessimistic outlook.

The report also revealed that more builders are cutting home prices, with the percentage increasing compared to February. This could signal a cooling in demand and an accumulation of unsold inventory on balance sheets. While sales expectations remained steady, there was a notable decline in prospective buyer traffic.

From a macroeconomic perspective, if builders are lowering prices in response to weakening demand, some analysts view this as a potential headwind for future GDP growth. However, despite the softer outlook and lower buyer traffic, overall sales projections have not been revised downward, which may appear contradictory.

This development aligns with Federal Reserve Chair Jerome Powell’s stance of maintaining current interest rates until concrete economic data justifies a shift. For now, sentiment remains mixed, with subjective opinions driving market sentiment more than definitive data signaling an economic downturn.  

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