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After a nine-day rally ended Monday, stocks dropped again Tuesday as trade policy turned from “easing tensions” to “season two.” The new script features a familiar cast, louder plot twists, and a smaller budget for diplomacy.

Level Change 5/6/25 (%)
– – – – – – – – – – – – – – –
-1.0 Dow
-0.9 Nasdaq
-0.9 Nasdaq 100
-0.8 S&P 500
-0.7 S&P 400
-0.6 S&P 600

The S&P notched its second-straight loss, joined in the red by every other major index. Chalk it up to profit-taking, a defensive rotation, or plain old buyer’s remorse after the market’s nine-day sprint through last Friday. That rally erased the S&P’s tariff-triggered dip. Now, tariff concerns are back.

President Trump vowed to dictate tariff levels and trade concessions in future negotiations, putting a fresh spin on The Art of the Deal, now revised as The Art of the Ultimatum. His pledge joined a proposed 100% tariff on foreign films and a warning that pharmaceuticals are next in the sniper scope. China tariffs remain in place at embargo-level intensity, and the administration has yet to produce any deals, unless you count anxiety as a deliverable.

Treasury Secretary Scott Bessent tried to calm nerves, noting that deal announcements could come this week, a forecast that’s becoming more recurring than reliable. The Financial Times floated a potential pact with the UK to lower tariffs on steel and cars, though at this point, “potential” feels like a synonym for “fictional.”

Markets weren’t comforted. The tone has shifted from “relief rally” to “uh-oh.”

The March trade deficit ballooned to a record $140.5B. Exports barely budged, but imports jumped as businesses scrambled to stock up before the next round of tariff surprises. It’s the economic version of hoarding toilet paper—only this time, it helped tip Q1 GDP into the red for the first time in three years.

On the earnings front, Palantir (PLTR -12.1%) beat expectations and lifted guidance, only to be punished for its lofty valuation and international softness. AI stocks, like Broadway divas, are expected to dazzle without missing a note. One off-key moment, and they’re booed off stage.

Ford (F +2.7%) and Mattel (MAT +2.8%) both pulled full-year guidance over macro uncertainty … and investors applauded anyway. Apparently, deer-in-the-headlights is the new confidence. Admitting you haven’t a clue is considered peak transparency and fiscal discipline.

Looking ahead, the Fed delivers its policy statement today at 2 p.m. ET. No rate change is expected, but Chair Powell will likely remind everyone that tariffs are unhelpful to both sides of the Fed’s dual mandate: stable prices and strong employment. Rate-cut expectations have been dialed down to 75 basis points this year, from 100+ just a week ago. Call it the Fed kaput.

The market is still digesting last week’s high, this week’s headlines, and next week’s haze. But for now, the message is that tariff drama isn’t over, it just went out for a sandwich.

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