The U.S Stock Market Rally Cools as a Fed Meeting Approaches, and Tariff Concerns Persist

U.S. stocks declined on Monday, putting the S&P 500 at risk of ending its longest winning streak in nearly 20 years. Investors were reacting to uncertainty surrounding global trade policy, particularly mixed signals about potential deals and tariffs. By early morning trading in New York, the S&P 500 had dropped 0.7%, the Nasdaq 100 slid 0.8%, and the Dow Jones Industrial Average was down 0.5%.

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Market sentiment has recently been shaped by both hopes and concerns over international trade negotiations and expectations for interest rate decisions from the Federal Reserve. Attention is now turning toward the Fed’s upcoming meeting on Wednesday. While President Donald Trump has stated he has no intention of firing Fed Chair Jerome Powell, he continues to publicly push for interest rate cuts. His comments suggest growing political pressure on the central bank to ease monetary policy, even as economic data remains mixed.

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On the trade front, Trump told reporters aboard Air Force One that the U.S. may finalize agreements with several countries as soon as this week. However, he clarified that he does not plan to speak with Chinese President Xi Jinping in the coming days, though he did not rule out the possibility of easing tariffs on China in the future. These developments have left investors uncertain about the likelihood of a meaningful breakthrough in U.S.-China relations.

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Strategists at Morgan Stanley, led by Michael Wilson, believe that a trade deal with China is essential if the U.S. stock market is to hold on to its recent gains. They argue that even a short-term agreement would provide much-needed reassurance to businesses, particularly around supply chain disruptions that have plagued multiple industries.

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The rally that recently lifted the S&P 500 and helped it recover from its earlier tariff-induced losses in April has now paused. The index had managed to climb above its 50-day moving average, a key technical indicator, and market watchers are now eyeing the 200-day moving average near the 5,746 level as the next significant resistance point.

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Craig Johnson, chief market technician at Piper Sandler, noted that the 200-day moving average often acts like a “rusty door” — requiring multiple attempts to break through. He suggested that if the market pulls back 3% to 5%, it could present a good opportunity for investors to increase their positions, viewing any short-term decline as a buying opportunity rather than a signal of deeper trouble.

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In corporate news, shares of Berkshire Hathaway dropped 6.35% following the announcement that Warren Buffett plans to step down by the end of the year. The company also reported a 14% decline in operating earnings compared to the same period last year. However, its cash reserves rose to a record high of $347.7 billion, signaling its financial strength even as profits dipped.

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Media and entertainment stocks also moved lower after President Trump announced plans to implement 100% tariffs on foreign-produced films. The announcement sparked concerns about the impact on companies like Netflix, whose stock fell 3.10% on the day.

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Tyson Foods also saw a decline after reporting mixed quarterly results. Although the company beat expectations on adjusted earnings per share, it fell slightly short on sales and reported ongoing challenges in its beef segment, which weighed on investor sentiment.

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In the energy sector, shares of oil companies were in focus for multiple reasons. Shell Plc is reportedly exploring a potential acquisition of rival BP Plc, according to sources familiar with the matter. At the same time, crude oil prices dropped following news that OPEC+ has agreed to another large increase in oil output. The decision has raised concerns about an oversupply in the market, pressuring energy stocks and contributing to broader market volatility.

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Altogether, Monday’s market performance reflected a combination of cautious investor sentiment, geopolitical uncertainty, and shifting expectations for monetary policy. With key developments expected later this week — particularly the Federal Reserve’s policy decision and ongoing trade negotiations — markets are likely to remain sensitive to headlines. Any signs of progress on tariffs or rate cuts could help restore investor confidence, while continued ambiguity may lead to more volatility ahead.

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