Trade Tensions and Leadership Shifts: What Ended the S&P 500's Nine-Day Rally?

The S&P 500’s historic nine-day winning streak—a run not seen since 2004—came to an abrupt end on May 6, 2025, as the index fell 0.6%. While the streak had been fueled by optimism over easing trade tensions and strong corporate earnings, the reversal was driven by a perfect storm of policy uncertainty, sector-specific headwinds, and investor anxiety over the Federal Reserve’s upcoming decisions. At the heart of the downturn was a sudden escalation in trade policy: U.S. President Donald Trump’s announcement of a 100% tariff on foreign-produced movies, framed as a “national security threat” due to tax incentives luring American film production overseas.

The tariff’s immediate impact was felt most sharply in the media sector. Disney (DIS), Netflix (NFLX), Warner Bros. Discovery (WBD), and Paramount Global (PARA) all slumped in early trading, reflecting investor concerns over the broader implications of such protectionist measures. While Trump’s move targeted a niche industry, its timing—amid stalled U.S.-China trade negotiations—reignited fears of a renewed trade war. Chinese officials had signaled openness to talks, but Trump’s refusal to engage with President Xi Jinping and his sudden escalation of tariffs underscored the fragility of global economic stability.

The Fed’s role further clouded the outlook. With a two-day policy meeting beginning on May 6, traders braced for uncertainty. The central bank was expected to hold rates steady, but the tariffs’ potential to inflate consumer costs or slow growth added a layer of unpredictability. This tension was reflected in bond markets: the yield on the 10-year Treasury note rose to 4.35%, as investors sought safety, while the dollar index fell 0.4%, signaling reduced confidence in the U.S. currency.

Beyond trade policy, sector-specific pressures compounded the downturn. Berkshire Hathaway (BRK-B) dropped 5% after Warren Buffett announced his retirement as CEO, with Greg Abel set to take over—a leadership shift that unnerved investors despite Buffett’s decades-long track record. Meanwhile, energy stocks like Chevron (CVX) and Exxon Mobil (XOM) fell 2% each as oil prices dipped, highlighting vulnerabilities in commodity-dependent sectors. Even tech firm Palantir (PLTR) declined 3% ahead of its earnings report, adding to the market’s cautious mood.

Historically, prolonged winning streaks like this one often end with volatility, but the S&P 500’s reversal was unique in its triggers. While the index had risen on hopes of corporate earnings (e.g., Ford’s first-quarter beat), the sudden policy shifts revealed how external factors can override positive fundamentals. Legal challenges to the tariffs—including lawsuits from 12 states and business groups—added further uncertainty, suggesting prolonged market instability.

The broader lesson is clear: in an era of geopolitical and policy unpredictability, investors must remain vigilant to external shocks. The S&P 500’s decline, though modest, serves as a reminder that even the strongest rallies can falter when confidence is tested. With the Fed’s decision pending and trade tensions unresolved, the coming weeks will determine whether this stumble becomes a sustained retreat—or a buying opportunity for the bold.

Conclusion
The S&P 500’s end to its nine-day rally underscores the outsized impact of policy uncertainty on markets. The 100% movie tariff, while targeting a specific sector, amplified fears of a broader trade war, reversing gains from earlier optimism. With media stocks like DIS and NFLX down sharply and the Fed’s hands tied by conflicting inflation/growth signals, the market now faces a critical juncture.

Crucial data points reinforce this analysis:
- The tariff announcement triggered a 3% drop in the Media sector ETF (PEJ) in a single session.
- The Fed’s policy meeting saw implied volatility (as measured by the VIX) spike to 18—its highest in six months.
- The 10-year Treasury yield’s rise to 4.35% reflects a flight to safety, while the dollar’s 0.4% decline highlights reduced risk appetite.

Investors should monitor the tariff lawsuits and the Fed’s response to inflationary pressures. If trade negotiations resume and the central bank signals patience, the S&P 500 could rebound. But with Trump’s policy shifts and sector-specific risks lingering, caution remains prudent. The rally’s end was not just a correction—it was a wake-up call to the fragility of today’s interconnected markets.