S&P 500 Falls Again as Traders Brace for Fed Decision and Tariff Impact

The S&P 500 Index closed on May 6, 2025, with a notable loss, dropping 43.47 points or 0.8% to end at 5,606.91. This marked the second straight day of declines, breaking the momentum of a remarkable nine-day winning streak—the longest on Wall Street in over two decades. The downturn came as investors reassessed risk amid trade policy uncertainty, corporate caution, and looming monetary policy updates.

The market’s mood soured after President Trump doubled down on a tough stance toward China, reinforcing tariffs as high as 135% on select imports. Treasury Secretary Scott Bessent added to the tension, confirming no formal trade talks with China were underway despite earlier hints of progress. These developments rattled confidence, leading major companies like Ford and Mattel to suspend their earnings forecasts, citing the unpredictable business climate.

Hedge fund billionaire Paul Tudor Jones weighed in with a bearish outlook, warning that stocks could hit fresh lows even if trade tensions ease, pointing to stubbornly high interest rates and weakening global demand. For investors, these combined factors have made the market environment particularly volatile heading into the next trading session.

Federal Reserve Decision Looms

A critical moment arrives today, May 7, as the Federal Reserve announces its latest policy decision. The Fed is widely expected to hold rates steady, but traders will be watching closely for any hints about future rate cuts or hikes. Inflation expectations have risen sharply among U.S. consumers, and the Fed’s tone on inflation and tariffs could determine whether markets stabilize or continue their downward slide.

Investors are particularly focused on whether the Fed will address the growing divergence between corporate earnings and macroeconomic conditions. With companies pulling forecasts and supply chain costs rising due to tariffs, the Fed’s balance between supporting growth and curbing inflation has never been more delicate.

For live updates and expert takes on the Fed’s decision, visit Yahoo Finance’s live coverage.

Tariffs and Trade Talks Keep Markets on Edge

Beyond the Fed, trade negotiations—or the lack thereof—remain a central driver of market sentiment. President Trump’s assertion that the U.S. doesn’t “have to sign” any deal with China has raised fears of a prolonged trade standoff, which could strain both U.S. and international companies.

Markets are also paying close attention to upcoming economic data releases, including employment numbers and inflation rates, which will offer fresh clues about the underlying health of the economy. While some investors see a buying opportunity in the recent dip, many remain cautious until there’s greater clarity on both trade and monetary policy.

For additional analysis on the market’s direction, check out Business Insider’s market outlook.

In summary, Wall Street faces a tense trading session ahead, with the Federal Reserve, trade policy, and economic data all converging to shape the path forward. Traders and investors would be wise to stay nimble and prepared for further swings.