Wall Street Pauses Rally as Fed Meeting, Tariff Risks Cloud Market Outlook

Stocks Cool as Nine-Day Rally Ends with S&P 500 Pullback

U.S. equities stepped back from their winning streak on Monday, May 5, 2025, with the S&P 500 closing down 0.6% at 5,650.38. The decline comes after nine straight sessions of gains, driven by optimism in tech and cyclical stocks. However, the start of the week saw renewed uncertainty as investors shifted their focus to upcoming policy announcements, geopolitical risks, and pivotal corporate earnings.

This cooling in sentiment was spurred in part by trade policy developments. Former President Donald Trump floated the idea of imposing 100% tariffs on certain foreign-produced content and goods—a move that reignited fears of a broader trade conflict. Stocks in the entertainment and streaming sectors, including Netflix and Paramount Global, were among the hardest hit.

Meanwhile, leadership news added to the mix. Berkshire Hathaway’s shares slid over 5% after the announcement that Warren Buffett will step down by year’s end. Though successor Greg Abel had long been identified as the heir apparent, the formal confirmation prompted a wave of institutional rebalancing in anticipation of future strategic shifts at the investment giant.

These developments dampened risk appetite at a critical time when Wall Street is also preparing for a highly anticipated Federal Reserve meeting. (AP News)

Fed Outlook, Tariff Tensions, and Earnings Set to Drive Tuesday’s Market

Looking ahead to the May 6 trading session, several critical factors are likely to drive market momentum:

First, the Federal Reserve’s two-day meeting begins Tuesday. Although no rate hike is expected, investors will comb through Jerome Powell’s post-meeting commentary for signals on inflation, employment, and the possibility of rate cuts later this year. The Fed’s tone could either soothe investors or stir volatility, particularly in rate-sensitive sectors like tech and real estate.

Second, the market remains wary of escalating trade tensions. The recent tariff talk has investors on edge, especially as retaliatory measures from foreign governments could impact exports and global supply chains. If further details emerge, expect sharper sector-specific movements and increased market choppiness. (Reuters)

Finally, the earnings calendar is heating up. Major tech names like AMD and Arista Networks are set to report. Their results could act as a barometer for broader sentiment in the semiconductor and cloud infrastructure spaces. A positive surprise could reinvigorate buying, while any disappointments could deepen the correction.

Investor Sentiment Cautious as Volatility Returns

Although the S&P 500 remains near all-time highs, the confluence of political developments, monetary policy uncertainty, and earnings pressures may fuel a more volatile path forward. Traders will be closely watching macroeconomic indicators, including Tuesday’s U.S. trade balance report, for signs of economic resilience or contraction.

In the short term, caution is likely to prevail. The next few sessions may offer more clarity—but also more turbulence—as Wall Street recalibrates its outlook.