The stock market's April showers eventually blossomed into May flowers. The S&P 500 has more or less recovered from losses sustained after the Liberation Day's tariff announcements five weeks ago, even though the nine-day winning streak finally broke on Monday.

One development has flown under the radar. Market pricing for Federal Reserve interest-rate cuts has changed dramatically over the past week, with fewer cuts expected. While there was always only a minuscule chance of reduction Wednesday, traders until the end of last week saw a move coming in June, and a strong probability of four quarter-point cuts this year.

Now there's a 70% chance of no change in rates in June, according to the CME FedWatch Tool. The strongest odds are for just three cuts by Christmas.

The shift isn't necessarily because of the stock market's recovery -- Fed Chair Jerome Powell knows it isn't his job to prop up share prices, even if investors often lean on him for help. And it isn't because President Donald Trump backed off on threats to fire Powell. No one really expected the central bank chief to bend to Trump's will -- if the Fed is going to cut, it's going to be because the economy needs support, and for now, it doesn't look like it does.

Powell's press conference Wednesday will be the best opportunity in a while to glean the Chair's thoughts on whether a slowdown is imminent -- the drop in output in the first quarter is a bad sign, but could also be statistical noise.

Friday's unexpectedly strong jobs report, on the other hand, did make a difference. As long as the labor market holds firm, there's little reason for the Fed to make a move. And optimism that Trump is likely to climb down on most tariffs -- the same sentiment that drove stocks back up -- also gives Powell more reason to keep rates higher.

The good news is that if traders are right, there's no need for cuts anyway -- the stock market can power ahead without them.

-- Brian Swint

***

Carney Meets With Trump Today. Trade Is on the Agenda.

When Canadian Prime Minister Mark Carney meets with President Donald Trump today, their discussion will include trade, tariffs, economic issues, and national security. "We'll focus on addressing immediate trade pressures -- and the future economic and security relationship between our two sovereign nations," Carney said on X.

   -- Carney, the Liberal Party leader and former central banker who won 
      Canada's April 28 election, said they had agreed on the importance of 
      working together "for their mutual betterment." He has rejected Trump's 
      calls for Canada to become the "51st state." 
 
   -- Carney said that "Canadians elected a new government to stand up to Trump 
      and to build a strong economy" in the face of the U.S.'s tariffs on 
      Canadian imports. As other nations "step back from global leadership, 
      Canada is stepping in." 
 
   -- Trump has enacted tariffs of 25% on steel and aluminum, 10% on energy, 
      and 25% on Canadian imports not covered by the U.S.-Mexico-Canada 
      Agreement. Canada responded with its own 25% tariffs on U.S. goods. 
 
   -- Treasury Secretary Scott Bessent defended Trump's policies at the Milken 
      Institute conference, saying they would make U.S. investment more 
      appealing and ultimately bring down Treasury rates by reducing the 
      "credit risk" of the U.S. government. 

What's Next: Carney said that Canada is the largest trading partner for more than 40 U.S. states, and is a major supplier of fertilizer, energy, and auto parts. Canada is hosting the Group of Seven summit from June 15-17, days before a 90-day pause on some tariffs expires.

-- Janet H. Cho

***

Ford Suspends Guidance, Sizes Up Tariff Impact

Ford Motor reported far better than expected first-quarter results, but sees a steep hit to profits for the full year and suspended its guidance. CFO Sherry House said Ford is "focusing on managing what we can control."

   -- Ford is the best-positioned of traditional auto makers to weather Trump's 
      tariffs. More than 80% of its cars sold in the U.S. are assembled here. 
      It ships vehicles made abroad via bonded carriers that aren't subject to 
      tariffs, and has stopped exporting vehicles to China. 
 
   -- Ford still expects those levies to bite. Ford suspended its financial 
      guidance and called out $1.5 billion in potential tariff impacts. 
      First-quarter vehicle sales were solid partly because dealers looking to 
      avoid tariffs bought in advance. It expects prices to stay flat this 
      year. 
 
   -- Adjusted operating profit of $1 billion and earnings per share of 14 
      cents from sales of $40.7 billion beat projections of $171 million in 
      operating profit and earnings per share that would break even from sales 
      of $38 billion, according to FactSet. 
 
   -- General Motors expects tariff impacts of $4 billion to $5 billion in 
      operating profit. GM imports about 45% of the cars it sells domestically, 
      mainly from Mexico. 

What's Next: Ford shares have moved an average of about 9% following the past four quarterly reports. The stock is up about 4% this year, about seven percentage points ahead of the S&P 500 and far outpacing peers.

-- Al Root, Anita Hamilton, and Janet H. Cho

***

Social Security Won't Claw Back Whole Checks After All

The Social Security Administration has backed off from its plan to claw back 100% of some recipients' monthly checks as it reimburses itself for erroneous overpayments of retirement and disability payments. The agency will now withhold only 50% of overpaid checks.

   -- The new rate is an increase from the Biden administration's 10% clawback 
      rate implemented last year, down from 100% previously. Clawing back half 
      of a benefit check will still cause an "economic and personal 
      catastrophe" for many recipients, said Richard Fiesta, executive director 
      of the Alliance for Retired Americans. 
 
   -- About 73 million Americans receive Social Security benefits. That 
      includes people age 65 or older, as well as beneficiaries with 
      disabilities, widowers, children of deceased parents, and others. About 
      40% of older Americans rely solely on Social Security for their income in 
      retirement, according to the National Institute on Retirement Security. 
 
   -- Elon Musk and Commerce Secretary Howard Lutnick allege that many people 
      are fraudulently receiving Social Security benefits. The agency's Office 
      of the Inspector General found that improper payments accounted for less 
      than 1% of total benefits paid from fiscal 2015 to fiscal 2022. 
 
   -- "Both underpayments and overpayments are now far harder for beneficiaries 
      to correct, since Elon Musk's DOGE has hollowed out Social Security," 
      says Nancy Altman, president of Social Security Works, an advocacy group. 
      Staffing cuts have made it harder to reach the agency by phone or in 
      person. 

What's Next: The Social Security Administration couldn't be reached for comment. If beneficiaries notified of an overpayment don't respond within 90 days to request a lower withholding rate, a reconsideration, or a waiver, the agency will withhold up to 50% of the benefit until it is repaid.

-- Elizabeth O'Brien and Janet H. Cho

***

Palantir Beats Revenue Expectations, Raises Current-Quarter Guidance

Software-maker Palantir Technologies exceeded high first-quarter earnings expectations, but shares fell after the report. The stock last week topped the S&P 500's best performers during Trump's first 100 days, with a nearly 61% gain since Inauguration Day, and is up 64% this year.

   -- Adjusted EPS were in line with Wall Street's consensus estimate of 13 
      cents, and up from eight cents last year. Quarterly revenue of $884 
      million beat the $862 million expected, and was up 39% on the year. 
 
   -- Palantir began as a vendor to intelligence and defense agencies but has 
      expanded into commercial markets. Its first-quarter revenue beat was 
      driven by U.S. sales, up 55% on the year, while U.S. commercial revenue 
      increased 71%. 
 
   -- Palantir booked $810 million in new segment contracts, up 183% from last 
      year. It has $2.3 billion left on existing U.S. commercial contracts. Its 
      19.9% operating margin increased from 12.8% last year. 
 
   -- Viewed through the lens of price-to-sales ratio for the next 12 months, 
      Palantir is the most richly valued company in the S&P 500, more than 
      doubling second-place Texas Pacific Land. 

What's Next: For the current quarter, Palantir guided $936 million in revenue, well ahead of Wall Street's expectation of $899 million. It also raised 2025 guidance for revenue, adjusted operating income, and adjusted free cash flow.

-- Adam Levine and Janet H. Cho

***

Trump Tariff Tentacles Reach New Areas

As the Trump administration seeks to negotiate dozens of international trade deals, foreign-exchange markets are reacting. The Taiwanese dollar weakened against the U.S. dollar after the Asian country's central bank rejected speculation the U.S. had pushed for a revaluation of the currency as part of trade talks.

   -- The New Taiwan dollar weakened 3% against the U.S. dollar on Tuesday. The 
      move partially reversed a surge in the past week that had caused the 
      Taiwanese currency's biggest single-day and one-week gains in history. 
 
   -- The Taiwanese central bank pushed back against speculation the U.S. had 
      asked for a revaluation of its currency in trade negotiations. Governor 
      Yang Chin-Long urged market commentators not to speculate on 
      foreign-exchange moves. 
 
   -- The U.S. Dollar Index, which tracks the value of the currency against a 
      basket of major peers, has fallen more than 8% this year so far. That has 
      hit institutions in countries such as Taiwan that have high exposure to 
      dollar-denominated assets. 

What's Next: The surge of Asian currencies against the greenback reinforces the suggestion that foreign investors are rethinking their exposure to U.S. assets amid President Donald Trump's efforts to reorder global trade. Investors will watch the first trade deals to see if the White House is demanding currency adjustments as part of negotiations.

-- Adam Levine, Adam Clark, Reshma Kapadia, and Janet H. Cho

***

-- Newsletter edited by Matt Bemer, Patrick O'Donnell, Rupert Steiner

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 06, 2025 07:00 ET (11:00 GMT)

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