As the stock market continues to navigate a landscape marked by significant volatility and uncertainty, recent developments have left investors grappling with mixed signals. On Monday, May 5, 2025, U.S. stocks slid, with the Dow Jones Industrial Average losing 99 points, or 0.24%, the S&P 500 falling 0.64%, and the tech-heavy Nasdaq Composite declining 0.74%. This downturn marked the end of a remarkable nine-day winning streak for both the S&P 500 and the Dow, their longest since 2004 and 2023, respectively.
This week holds particular significance as it coincides with the Federal Reserve’s Federal Open Market Committee (FOMC) meetings on interest rates. Traders are widely expecting the central bank to maintain its current rate range of 4.25% to 4.50%, as indicated by the CME FedWatch Tool, which shows that 97% of surveyed traders anticipate no changes at this meeting. However, the looming uncertainty surrounding tariffs and trade negotiations continues to overshadow the market.
Recent comments from Treasury Secretary Scott Bessent suggested that the Trump administration is “very close” to finalizing trade deals with several countries, echoing President Trump’s remarks that agreements “could very well” materialize this week. Despite these optimistic statements, analysts remain skeptical about the likelihood of achieving comprehensive trade agreements within the current 90-day tariff pause.
“The market is intensely focused on where the tariff rates end up, and it’s bouncing around day to day as those assessments change,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. “I don’t think anybody really has a good idea of what’s to come.”
Adding to the market’s anxiety, the White House announced that no “final” decisions have been made regarding new tariffs on films produced outside the United States, following Trump’s suggestion of imposing a 100% duty on foreign-made motion pictures. This uncertainty has led to fluctuations in shares of major filmmakers, with Netflix down 1.94%, Disney falling 0.41%, and Paramount sliding 1.57%.
In commodities markets, oil prices have taken a hit as OPEC+ announced plans to increase production. U.S. oil fell 1.99% to around $57.13 a barrel, the lowest level in over four years, while Brent crude dropped 1.7% to approximately $60.25. Meanwhile, gold has surged more than 2.5% to rise above $3,300 a troy ounce, as investors flock to the haven metal amid market uncertainty.
As the week progresses, all eyes will be on the Federal Reserve’s decisions and remarks from Fed Chair Jerome Powell, expected on Wednesday, May 7, 2025. The Fed faces a challenging task of balancing inflation and unemployment, particularly as consumer confidence appears to be waning due to ongoing tariff concerns. The University of Michigan’s Consumer Sentiment Survey revealed an 8% dip in consumer expectations for inflation in the year ahead, rising to 6.5% from 5% last month.
Tom DeMark, a veteran Wall Street analyst, has voiced concerns about the market’s trajectory, suggesting that the S&P 500 could stall near 5,669. Following a dramatic surge after Trump paused most reciprocal tariffs on April 9, the index has experienced a notable pullback, closing at 5,650 on May 5, 2025. DeMark warns that stocks are vulnerable to further declines, particularly if trade negotiations falter.
“A top is imminent. Too much technical damage has been done,” DeMark told Bloomberg. “Stocks are vulnerable right now and can easily get hit pretty badly if anything quickly changes on the global trade outlook.”
In addition to these macroeconomic concerns, the earnings season is in full swing, with notable reports from companies such as Palantir Technologies, Disney, and Advanced Micro Devices (AMD) expected this week. Analysts anticipate Palantir will report earnings of 13 cents per share, reflecting a remarkable 435% increase over the past year. Other notable companies reporting include Marriott on Tuesday, May 6, and Coinbase Global on Thursday, May 8.
Despite the challenges posed by tariffs and trade negotiations, some companies are showing resilience. For instance, Wabtec (WAB) and Lennox (LII) have been highlighted as stocks to watch, with Wabtec experiencing an average organic revenue growth of 9.5% over the past two years, and Lennox’s earnings per share increasing by 24.3% annually. Investors are keenly observing these companies as potential indicators of market trends.
As the market continues to react to trade negotiations and economic indicators, the sentiment remains one of caution. The CNN Fear and Greed Index indicated that “Greed” was the sentiment driving markets on May 5, 2025, for the first time since December. With the Fed's decisions looming and trade uncertainties persisting, investors face a complex landscape as they navigate their strategies in the coming weeks.
Ultimately, the interplay of tariffs, trade negotiations, and economic indicators will shape the direction of the stock market. As uncertainty reigns, the coming days will be crucial for investors looking to make informed decisions amidst a fluctuating economic environment.
