Stock Market Volatility Mounts as Tariffs and Fed Uncertainty End Historic Rally Run

The U.S. stock market’s recent winning streak came to an abrupt halt on May 6, 2025, as investors grappled with the dual pressures of escalating tariff risks and uncertainty surrounding the Federal Reserve’s policy decision. The Dow Jones Industrial Average (^DJI) shed 0.3%, ending its longest consecutive gain streak in over two decades, while the S&P 500 (^GSPC) fell 0.6%, snapping a nine-day rally—the longest since November 2004. The Nasdaq Composite (^IXIC) fared worst, dropping 0.8%, as tech stocks faced headwinds from rising cost pressures and geopolitical tensions.

At the heart of the downturn was President Trump’s surprise announcement of a 100% tariff on foreign-made movies from Canada and the U.K.—a move targeting the entertainment industry. The policy immediately sent shares of media giants reeling: Netflix (NFLX) dropped 3%, Walt Disney (DIS) fell 1%, and Paramount Global (PARA) slid 1.3%. The tariff’s broader implications loomed large: investors feared inflationary pressures and supply-chain disruptions, with analysts warning of potential ripple effects across global trade.

The Federal Reserve’s upcoming policy meeting, starting May 6, added to market anxiety. Despite strong April jobs data—177,000 new nonfarm payrolls—analysts anticipated the Fed would hold rates steady amid conflicting signals. Fed funds futures priced in just a 3.2% chance of an immediate rate cut, reflecting skepticism about near-term easing despite President Trump’s public pressure on Chair Jerome Powell.

The tech sector bore the brunt of tariff-related fears. Apple (AAPL), Amazon (AMZN), and Tesla (TSLA) each fell over 2%, as investors questioned how rising input costs would impact profit margins. Meanwhile, energy stocks like Chevron (CVX) and Exxon Mobil (XOM) declined 2%, dragged down by crude oil prices hitting multi-year lows. Oversupply and demand uncertainty, exacerbated by trade disputes, deepened concerns about global economic health.

Even Berkshire Hathaway (BRK-B) contributed to the S&P 500’s stumble, with shares plunging nearly 6% after Warren Buffett announced successor Greg Abel’s 2026 CEO transition. The move spooked investors accustomed to Buffett’s leadership, underscoring risks tied to leadership changes at legacy firms during turbulent times.

Yet not all sectors faltered. Defensive assets like gold and healthcare stocks gained traction. Gold surged to $3,320 per ounce, with Newmont Mining (NEM) rising 3%, as investors sought safe havens. The iShares MSCI EAFE ETF (EFA), tracking international equities, had outperformed U.S. markets by 14% year-to-date—a stark reminder of global diversification’s appeal.

Analysts emphasized the need for a tactical approach. Sector rotation toward defensive plays, quality growth stocks, and international exposure became critical. The “Recession Buy Indicator” (RBI)—suggesting equity opportunities post-official recession confirmation—gained attention, though the National Bureau of Economic Research had yet to declare a downturn.

The May 6 market performance revealed a fragile equilibrium: optimism over corporate earnings clashing with fears of trade-driven inflation and policy uncertainty. Key risks remain: the Fed’s decision, the trajectory of trade negotiations, and the sustainability of profit margins amid rising costs.

In conclusion, investors are now at a crossroads. With the S&P 500’s streak broken and defensive assets gaining ground, portfolios must balance growth exposure with resilience. The data underscores sector-specific vulnerabilities—tech margins, energy supply-demand imbalances, and leadership transitions—while highlighting gold and international equities as critical hedges. As of May 6, the market’s retreat signals a pivot toward caution, with clarity on Fed policy and trade outcomes likely needed to restore momentum.

The path forward hinges on navigating these risks with discipline. For now, diversification and a focus on quality growth, paired with defensive allocations, remain the best defense against a landscape where tariffs and policy decisions hold outsized sway.