Along with the now-standard stream of tariff headlines and a few noteworthy tech sector earnings, one of the closely watched market catalysts this week will be the May 6-7 Federal Open Market Committee (FOMC) meeting. As Fed Chair Jerome Powell and his crackerjack team of monetary policy wonks convene for their regularly scheduled two-day summit, CME’s FedWatch tool is showing an overwhelming 97% chance that the FOMC will stand pat on interest rates.

Over the summer, however, the consensus forecasts start to get a little… mixed. That means investors will be listening closely to the post-meeting press conference for any clues from Powell, according to Barchart columnist Mohit Oberoi. 

“I believe the Fed meeting might be more of the same thing, where Powell will warn on uncertainty from the tariffs and still-high inflation while maintaining rates,” notes Oberoi. “What could be different is the commentary on the economy, as while Powell has repeatedly said that the U.S. economy is on a strong footing, the Q1 GDP data showed a contraction.”

And even if reporters are finally tired of questions about President Donald Trump’s ability to fire Powell, commodities expert Andrew Hecht isn’t exactly expecting an apolitical presser, “as there have been no concrete trade deals as of yet and the Fed is concerned about the inflationary impact of tariffs,” he observes.

“The May Fed meeting is a line in the sand between the central bank and administration,” says Hecht. “Expect volatility!”

Or, as Senior Market Analyst Darin Newsom explains it: “The entertainment value is not in the FOMC meeting itself, but rather the screaming and arguing amongst the ‘experts’ who don’t understand the market was showing the outcome all along. Not to mention Chairman Powell and the other Fed governors continue to make statements indicating what the next move is to tamp down some of the market volatility intentionally created by others.”

With all eyes on Powell & Co. this week, here are more insights from our top analysts to get you Fed-ready.

Could Powell Surprise Markets?

“My thoughts are that this upcoming Fed meeting is going to be a non-event. The Fed will tell us that it remains data-dependent and is waiting for the official implementation of tariffs. That clarity won't happen until the 90-day pause is up.”

“The surprise would be a cut, and that would signal to the market that the Fed sees or knows something that we don’t. In other words, an admission of a recession – cutting rates for the wrong reasons. The Fed is in a difficult spot, as lowering rates risks accelerating inflation, or not cutting rates and falling behind the curve when it comes to a recession.”

• John Rowland, CMT, is Barchart’s Senior Market Strategist and host of Market on Close.

“The FOMC is under new pressure to lower short-term rates, given the decline in Q1 GDP. Stocks will rally if the Fed lowers rates, especially financial stocks.”

• Mark Hake, CFA, is a regular contributor to Barchart’s Unusual Options Activity Report.

Stocks & Sectors to Watch on Fed Day

I’ll be watching the dollar’s reaction and the ensuing gold reaction. A stronger dollar would be a sign of the Fed’s pause, maintaining the status quo, and a lower dot plot of cuts for the rest of the year. A rising gold (GCM25) price would signal a higher probability of inflation, probably due to tariffs.”

“Under the radar, since ‘Liberation Day,’ I’ve noticed cyclical sectors, industrials, and financials, along with staples, have been outperforming the broader indexes. Typically, that’s a sign of a strengthening economy. Weird anomaly, or are these the sectors that will be tariff-resilient?”

• John Rowland, CMT

“We know Chairman Powell has talked about the effects of endless trade wars and tariffs, how these are the ingredients for renewed inflation, and the initial defense against inflation is raising rates.”

“Weekly jobless claims, aka the comic relief of economic reports, is showing an employment slowdown. Recall what helped fight off the effects of the previous round of inflation – again sparked by this administration’s initial global trade fights back in 2018 – was a strong labor market and continued unchecked consumerism.”

“Continuing with that thought, it will be interesting to see what direction the US boxed beef market takes over the coming weeks/months. On the economic side, Dr. Copper is having a difficult time building bullish momentum.”

• Darin Newsom

“Veteran market watchers will be closely watching how the crude oil market (CLM25) reacts in the  immediate aftermath of the FOMC results. Crude oil is the leader of the raw commodity sector. Its daily price moves have a significant influence on many other commodity markets’ daily price action.”

“A surprisingly hawkish lean by the Fed would likely further pressure oil prices. A surprisingly dovish lean on U.S. monetary policy would likely rally crude prices.” 

“Key price levels to watch in June crude oil futures after the FOMC meeting are the April low of $54.67. There is likely a good amount of pre-placed sell-stop orders just below that level, which if triggered would likely push prices to test $50.00 a barrel. A close in crude oil prices below the April low would be an ominously bearish development for commodity futures markets.”

“Conversely, a close in June crude above $62.50 would suggest a market bottom is in place in oil and that trader and investor risk appetite in the general marketplace has improved. That’s an important element for the speculative traders to become more active on the long sides of commodity futures markets.”

• Jim Wyckoff, commodity analyst

When Could the Fed Start to Cut?

“A look at the Fed fund futures forward curve has shown us for months the market is not expecting a rate cut at the conclusion of the May meeting. In fact, the market isn’t looking for a rate cut until at least the meeting at the end of July. What’s interesting about this is it keeps getting pushed back, highlighting the fact market outlooks are not locked in, but change over time.”

• Darin Newsom

“The Fed needs a combination of the following to make a cut: definitive GDP numbers (beyond Q1’s anomaly), and/or a deteriorating job market.”

“Nonfarm payroll employment numbers are my go-to report for the job market as they report the net change in typical U.S. jobs. An increasing number is bad (if you’re looking for a cut), and it is reported monthly.”

“Advanced Q2 GDP numbers, however, are due July 30. So, I’d say the July and September Fed meetings could be a lot more interesting (re nonfarm payrolls and GDP) than this week’s meeting.”

• Rick Orford is a regular contributor to Dividend Investor.

Elizabeth Volk, Barchart’s Senior Editorial Director, contributed to this report.