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Conflict in the Middle East put a pause in the market advance last week. For the week, the S&P 500 Index was -0.4%, the Dow Jones Industrials -1.3%, and the NASDAQ -0.6%. The Energy, Health Care, and Utilities sectors led the S&P 500 Index for the week, while the Financial, Industrial, and Consumer Staples sectors lagged. The 10-year U.S. Treasury note yield decreased to 4.412% at Friday’s close versus 4.505% the previous week.
Recent inflation reports have yet to show a meaningful upward impact on prices due to tariffs. The May Consumer Price Index (CPI) was +0.1% month-over-month and +2.4% year-over-year. Core CPI, which excludes food and energy prices, was +0.1% month-over-month and +2.8% year-over-year. The May Producer Price Index (PPI) was +0.1% month-over-month and +2.6% year-over-year. Core PPI, which excludes food, energy, and trade prices, was +0.1% month-over-month and +2.7% year-over-year.
The Federal Reserve is holding its Federal Open Market Committee (FOMC) meeting this week. It is widely expected the FOMC will keep the Fed funds rate steady in the current 4.25% to 4.50% target range but lay out a policy path for the remainder of the year. Current CME Fed funds futures show a total of 0.50% in reductions forecast for 2025.
This week six companies in the S&P 500 Index are scheduled to report earnings results with one for the first quarter and five for the second quarter. First quarter should end with 13.3% earnings growth year-over-year and 4.9% revenue growth. Second quarter earnings are expected to grow 4.9% with revenue growth of 4.1%. Full-year 2025 earnings are expected to grow by 9.0% with revenue growth of 5.0%.
In our Dissecting Headlines section, we look at what is presented as part of the Summary of Economic Projections and the dot plot.
Financial Market Update
Dissecting Headlines: The Dot Plot
Each quarter, the members of the Federal Reserve’s Federal Open Market Committee (FOMC) update their forecasts of where they see interest rates over the next few years. The forecasts are assembled into a “dot plot” and the mid-point of each plot is seen as the likely target level for interest rates for each period.
Investors will be watching the dot plot scheduled for release after this week’s FOMC meeting for potential changes in the policy path for interest rates based on how the Committee sees the economy shaping up over the remainder of the year. At the March meeting, the appropriate target for year-end 2025 for the Fed funds rate was seen at 3.75% to 4.00%, or 0.50% lower than the current range of 4.25% to 4.50%. Multiple Federal Reserve officials have spoken about the potential for tariff and trade policy to be inflationary.
While the FOMC is not expected to make any change to the Fed funds rate at the meeting, any changes to their projected policy path or economic outlook for the remainder of the year could be market moving if it differs widely from the projections published in March. As of March, the projections for 2025 were for GDP growth of 1.7%, unemployment at 4.4%, PCE inflation at 2.7% and core PCE inflation at 2.8%.
Following the meeting, the FOMC will publish its policy statement and the Summary of Economic Projections (which includes the dot plot). Federal Reserve Chairman Jerome Powell will also hold a press conference. The totality of information presented will help investors anticipate the FOMC’s potential policy decisions with respect to interest rates. As of the current CME Fed funds futures market, reductions to the Fed funds rate of 0.25% each are expected at the September and December FOMC meetings.
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Want a printable version of this report? Click here: NovaPoint Weekly June 16, 2025
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