Stock market sees significant downturn as tariff uncertainties rise

In the United States, on Monday, May 4, 2025, stock futures ended little changed as investors prepared for the Federal Reserve's first policy meeting since recent tariff announcements by President Donald Trump. The S&P 500 experienced a 0.6% decline to end a nine-day winning streak, which had been its longest rally since 2004. The Nasdaq Composite dropped by 0.7%, while the Dow Jones Industrial Average saw a slight decrease of 0.2%. The backdrop of this market movement is primarily attributable to tariff uncertainties lingering over the economy, as both Treasury Secretary Scott Bessent and President Trump hinted at potential trade deals in progress. However, concrete agreements between the U.S. and its trading partners remain unannounced despite these discussions. In the same context, a report from the Institute for Supply Management indicated stronger growth in the service sector, which would ordinarily bolster market confidence, but concerns around impending tariffs overshadowed this positive news. Investors are particularly anxious as they anticipate the conclusions of the Fed’s two-day meeting followed by an announcement regarding interest rates. Although futures trading suggests only a 2.7% likelihood of a rate cut, traders are attentive to Fed Chair Jerome Powell's comments, particularly around economic outlook and potential impacts of tariffs on inflation and interest rates. Analyst Megan Horneman projected that supply chain disruptions could occur temporarily, leading to a potential, albeit short, economic slowdown. Yet, she expressed optimism that agreements would emerge sooner rather than later, owing to the interconnectedness of global economies. Additionally, investors are keenly awaiting the release of data concerning the U.S. trade deficit for March, along with earnings reports from DoorDash, Advanced Micro Devices, and Super Micro Computer set for that Tuesday. This whole economic atmosphere indicates a precarious balance, leaving traders with mixed feelings as they navigate both the potential developments in trade negotiations and the impending decisions by the Federal Reserve.