Stock Market Today: Stocks Rise Despite Stagflation Risk

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Investors, traders and speculators welcomed news of a scheduled meeting between top representatives of President Donald Trump and President Xi Jinping to discuss tariffs and trade.

After gapping up at the opening bell, stocks settled into a sideways range ahead of Wednesday's widely anticipated decision by the Federal Open Market Committee to hold interest rates steady for now.

Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer will meet this weekend in Switzerland with a Chinese delegation led by Vice Premier He Lifeng.

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The U.S. and China have imposed retaliatory tariffs on each other of 145% and 125%, respectively. Bessent said current tariff rates aren't sustainable and amount to a trade embargo.

U.S.-China Business Council President Sean Stein told Bloomberg TV it's reasonable to expect "tariffs could be paused for 90 days while the two sides negotiate."

During testimony before the House Financial Services Committee on Wednesday, the Treasury secretary described talks with some partners as "quite advanced" and foreshadowed agreements in principle "in the coming months," but did not name names.

"There are 18 important trading partners," Bessent said, "and we are moving forward in all deliberate speed with those." Bessent confirmed talks with China on Saturday in Switzerland.

"One can make a reasonable argument that at least some of the recent stock market bounce higher can be attributed to anticipation that some trade deals will be announced in the near term," writes Wells Fargo Investment Institute Senior Global Market Strategist Scott Wren.

"Further near-term upside in the S&P 500 Index is likely limited," Wren concludes, "and we expect to see more downside volatility before the tariff uncertainties are resolved."

By the closing bell, the blue-chip Dow Jones Industrial Average was up 0.7% to 41,113, the broad-based S&P 500 had risen 0.4% to 5,631, while the tech-heavy Nasdaq Composite was higher by 0.3% to 17,738.

The Fed sees increased uncertainty

The FOMC held the target range for the federal funds rate at 4.25% to 4.50% at the conclusion of its first two-day meeting since President Trump's April 2 "Liberation Day" tariffs announcement.

"Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace," the Fed writes in the opening paragraph of its FOMC statement.

"The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated," it continues.

The Fed does acknowledge that "uncertainty about the economic outlook has increased further" and "judges that the risks of higher unemployment and higher inflation have risen."

During his post-meeting press conference, Fed Chair Jerome Powell said, "I think there's a great deal of uncertainty about, for example, where tariff policies are going to settle out and also when they do settle out, what will be the implications for the economy, for growth, and for employment. I think it's too early to know that."

"The inflation picture remains elevated and sticky," observes Chris Brigati, chief investment officer at San Antonio-based money manager SWBC, "and unemployment continues to be relatively contained, so the Fed lacks the necessary ingredients to cut rates."

According to 30-day fed funds futures prices, the probability of a 25 basis point rate cut at the next Fed meeting in June has declined to 24.2% from 63.2% on April 30. That's a function of the stronger-than-expected April nonfarm payrolls report.

We're tracking news and developments around today's meeting on our live Fed blog.

AMD is up

Advanced Micro Devices (AMD) enjoyed a solid 4.9% bounce at Wednesday's opening bell after the semiconductor stock posted expectations-beating first-quarter earnings and shared better-than-forecast second-quarter sales guidance after Tuesday's closing bell and held a 1.7% gain into the closing bell.

AMD reported earnings of 96 cents per share, just above a FactSet-compiled consensus estimate of 94 cents. Revenue was $7.4 billion vs $7.1 billion, as data-center revenue grew by 57% year over year to $3.7 billion.

And management said sales for the current quarter will be $7.4 billion vs a $7.2 billion Wall Street estimate.

"Despite the dynamic macro and regulatory environment," said CEO Lisa Su in a statement, "our first-quarter results and second-quarter outlook highlight the strength of our differentiated product portfolio and consistent execution."

Su explained during AMD's conference call that the chipmaker's differentiated product line will help it navigate regulatory headwinds such as export controls. AMD had previously said export controls would have a $1.5 billion impact on full-year revenue.

Mickey Mouse goes to the Middle East

Walt Disney (DIS) was the top-performing Dow Jones stock on Wednesday with a gain of 10.7% after management reported expectations-beating fiscal year 2025 second-quarter earnings and announced it will build a theme park in Abu Dhabi.

Disney reported EPS of $1.45 on revenue of $23.6 billion vs a FactSet-compiled consensus of $1.19 on $23.1 billion.

Revenue for the experiences segment, which includes theme parks, was up 6% to $8.9 billion vs a Wall Street estimate of $8.7 billion.

The streaming division, which includes the Disney+ platform, added 2.5 million subscribers, as operating profit surged to $336 million from $47 million a year ago.

Disney forecast full-year EPS of $5.75, higher than analysts' forecast of $5.43.

"We continue to monitor macroeconomic developments for potential impacts to our business," management explained, "and recognize that uncertainty remains regarding the operating environment for the balance of the fiscal year."

In a separate announcement, Disney said it plans to build a new theme park on an island in Abu Dhabi, its seventh such venue worldwide, but its first in the Middle East.

"This groundbreaking resort destination represents a new frontier in theme park development," said Disney Parks, Experiences and Products Chairman Josh D'Amaro in a statement. "Our resort in Abu Dhabi will be the most advanced and interactive destination in our portfolio."

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David Dittman is the former managing editor and chief investment strategist of Utility Forecaster, which was named one of "10 investment newsletters to read besides Buffett's" in 2015. A graduate of the University of California, San Diego, and the Villanova University School of Law, and a former stockbroker, David has been working in financial media for more than 20 years.