The S&P 500's nine-day rally - its longest winning streak in nearly 20 years - came to an abrupt end on Monday, marking a stark reversal after the index had nearly recovered losses triggered by early April's "reciprocal tariffs" rhetoric. This rally had been fueled by the Trump administration's decision to suspend additional tariffs and positive signals from trade negotiations.
Tariff Policy Uncertainty Resurfaces
While the S&P 500 closed May 2 with a 1.5% gain to secure its ninth consecutive daily advance, markets remained under the cloud of tariff policy risks. Morgan Stanley strategist Michael Wilson and his team emphasized that maintaining this upward trajectory would require concrete progress on trade agreements.
The anticipated trade deal optimism evaporated abruptly on May 5 when the Trump administration unexpectedly announced punitive tariffs on foreign-produced films while ruling out high-level negotiations. This policy reversal immediately dampened market sentiment.
A partial recovery emerged on May 7 after U.S. Treasury Secretary Besant suggested the administration might announce trade agreements with "some of the largest trading partners" this week, though specifics remained undisclosed. These remarks helped pare losses, with the S&P 500 closing down just 0.17%.
Corporate Earnings Guidance Signals Caution
Last week's earnings reports from Meta, Microsoft, Amazon, and Apple revealed stable performance but universal warnings about tariff-related challenges. Several corporations revised or withdrew guidance entirely:
Apple forecast $900 million in tariff-related losses for Q3 FY2025 (March 30-June 28)
Tesla declined to provide Q2 guidance
Ford and Delta Air Lines retracted full-year financial projections
Berkshire Hathaway's Leadership Transition
Berkshire Hathaway shares recently declined following Warren Buffett's announcement of his planned December 2025 CEO retirement. The conglomerate reported a 14% YoY drop in Q1 operating profits due to slumping insurance underwriting earnings and dollar depreciation.
Mounting Economic Uncertainties
Hedge fund veteran Paul Tudor Jones expressed skepticism about current market conditions: "Trump is trapped by tariffs. The Fed insists on not cutting rates. This combination spells trouble for equities".
Federal Reserve Policy Stance
The Federal Reserve maintained its benchmark interest rate at 4.25%-4.50% on May 7, marking the third consecutive pause since January. Chair Jerome Powell highlighted elevated economic uncertainties:
"Downside risks have increased even before appearing in economic data. Businesses and households universally express concerns that prolonged policy inaction could manifest in key indicators within weeks or months".
Powell specifically addressed tariff impacts: "The cumulative tariff increases exceed initial expectations. Multiple surveys confirm these measures are elevating inflation expectations".
Navigating Market Volatility
With trade policy fluctuations, deteriorating corporate outlooks, and ambiguous economic signals creating unprecedented uncertainty,
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