Today's War Room Trading Recap

Market Recap – May 7, 2025

The U.S. stock market saw a volatile but ultimately resilient session today, with major indexes reversing early losses and closing near flat or slightly higher after the Federal Reserve’s policy announcement. As expected, the Fed held interest rates steady, but the tone of the statement and Powell’s comments in the press conference left traders parsing the language for clues about future cuts.

Key Drivers of Price Action:

• Fed Announcement: The main catalyst today was the FOMC statement released at 2 PM ET. While no change in rates was widely expected, the market reacted sharply to any perceived shift in the Fed’s tone. The statement reiterated a data-dependent approach, and Powell acknowledged recent signs of sticky inflation but didn’t rule out potential easing later in the year.

• Three-Stage Reaction: The market displayed the classic “three-stage” post-Fed move—an initial spike higher, a sharp sell-off, and a final retracement back toward pre-announcement levels. This pattern repeated across the Nasdaq 100, Dow, and S&P 500.

• Technical Levels in Play: Price action respected key VWAP and threshold levels from the morning’s trading plans, especially in high-beta names like Nvidia and Tesla. Traders leaned heavily on intraday support and resistance zones once the Fed dust settled.

• Sector Rotation: Tech led early, faded on rate sensitivity, then rebounded late in the session. Financials and energy remained choppy as traders repositioned following the Fed’s neutral tone.

Overall, today’s price action underscores the importance of patience and risk control on major news days. Volatility surged, but disciplined traders using predefined levels had several opportunities both before and after the Fed release.