Schwab Market Update
Tariff Trouble: Stocks Sink on New Trump Threats

Published as of: May 23, 2025, 9:12 a.m. ET
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The markets | Last price | Change | % change |
---|---|---|---|
S&P 500® index |
5,842.01 |
-2.60 |
-0.04% |
Dow Jones Industrial Average® |
41,859.09 |
-1.35 |
0.00% |
Nasdaq Composite® |
18,925.74 |
+53.09 |
+0.28% |
10-year Treasury yield |
4.48% |
-0.68 |
-- |
U.S. Dollar Index |
99.34 |
-0.62 |
-0.62% |
Cboe Volatility Index® |
24.58 |
+4.26 |
+21.01% |
WTI Crude Oil |
$60.47 |
-0.73 |
-1.19% |
Bitcoin |
$108,700 |
-$2,740 |
-2.46% |
(Note to readers: U.S. markets are closed Monday, May 26, in observance of Memorial Day. The Schwab Market Update will return on Tuesday, May 27.)
(Friday market open) Just as markets were settling in for the long Memorial Day weekend, Wall Street got a harsh wake-up call from new tariff threats. Stocks dove about 90 minutes before the open after President Trump threatened 25% tariffs on Apple's (AAPL) iPhone and 50% tariffs on European Union products. Apple shares immediately plunged more than 3% in pre-market trading and major indexes, which had been flat, dove more than 1%.
Apple builds most of its iPhones in China but has moved some production to India. That wouldn't meet Trump's demands, he posted on social media, threatening 25% tariffs on iPhones made in "India or anyplace else." As for Europe, Trump said trade talks had been difficult, and the 50% tariff would take effect June 1. His threats put trade back on page one when some had hoped tensions were easing after the recent U.S.-China meeting, and market volatility surged in the aftermath, a potential warning of more choppiness ahead.
The new fears also raised worries about the economy, sending Treasury yields sharply lower and the dollar down. The 10-year note yield initially fell nearly 10 basis points to below 4.46% before clawing back to nearly 4.5%. "The drop in yields will likely have limited legs because the market is now conditioned to believe these proposals will eventually be throttled back," said Kathy Jones, chief fixed income strategist at Schwab.
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Three things to watch
- Sunday at Princeton with Powell: Memorial Day weekend barbecues and ballgames get interrupted this time by Federal Reserve Chairman Jerome Powell, who delivers baccalaureate remarks at Princeton University, his alma mater, on Sunday. Due to the holiday closure Monday, there's no U.S. trading until the pre-market hours that evening, so initial reaction might be hard to pin down in the unlikely event Powell says anything about policy or the economy. One way to check the market's response is to follow overseas stocks Monday, as it's not a holiday for most of the world. Powell can make news whenever he talks publicly, so that possibility can't be discounted. Fed speakers all week sounded reluctant to rock the boat. "The Fed is not coming to the rescue," said Schwab's Jones. "There have been a lot of speeches and interviews from Fed officials over the past few weeks. Each has reiterated the view that policy is on hold for a while, so expectations for Fed rate cuts this year have declined."
- New home sales today, GDP, PCE next week: Data and earnings are thin today ahead of the long holiday weekend, but new home sales for April come out this morning. Analysts expect a seasonally adjusted annual rate of 679,000, a significant retreat from 724,000 in March. This follows a disappointing report on April existing home sales yesterday—the lowest April reading since 2009. Next week—shortened by Monday's U.S. holiday—brings a second government estimate of U.S. first quarter gross domestic product (GDP) after the first estimate came in at an annually adjusted rate of –0.3%. Another major data point to watch next week is the April Personal Consumption Expenditures (PCE) price index, a fresh update on inflation. The main equity event is Wednesday afternoon when AI giant Nvidia (NVDA) becomes the last Magnificent Seven member to share earnings. That could at least temporarily put Treasuries and trade news on page two, but several Treasury auctions are on the calendar next week and demand is under scrutiny after this week's 20-year auction went poorly and caused yields to spike.
- Recession chances down but not out: Tariff de-escalation before Friday's renewal of tensions had eased odds of a recession to likely less than even. "I don't think we're out of the woods," said Schwab Chief Investment Strategist Liz Ann Sonders, speaking before Trump's new threats. "The growth impact is still ahead of us and we've seen a pretty significant compression in what's called the soft economic data, or survey-based data—everything from consumer confidence and sentiment to inflation expectations to CEO confidence. A lot of the surveys around capital spending plans and big investment plans have sunk like a stone. We haven't yet seen a commensurate amount of weakness in the hard data, specifically within the labor market." Some weakness has shown up, she added, but the economy hasn't felt the brunt of it, especially in terms of inflation. Recent inflation data, which was light, covered a period where the average effective tariff rate was less than 5%, slightly above the 3% on inauguration day. Even with the recent de-escalation of tariffs on Chinese goods, the effective tariff rate is now more than 17%. "Everybody has to understand the math associated with this. I still think we have the effects to come and that will be dependent on whether the de-escalation continues or if we ramp back up," Sonders said.
On the move
- Apple dropped 3.2% ahead of the open after President Trump threatened it with 25% tariffs on iPhones not made in the U.S. A month ago, Reuters reported Apple was moving to make most of its iPhones for the U.S. market in India, rather than China. Earlier this month, Trump said he "had a little problem with Tim Cook," Apple's CEO. Apple shares have fallen seven straight sessions heading into today, with political risk a factor, according to Bloomberg.
- Nvidia fell 2.5% and Palantir (PLTR) lost 1.6% ahead of the open, possibly a sign that the rest of the tech sector is following Apple's path downward.
- Amazon (AMZN), which also sources many of the products sold on its site from China, fell 3% after Trump's threat against Apple.
- Autodesk (ADSK) climbed 2.5% in pre-market trading after the software firm beat earnings expectations and forecast an outlook for the second quarter that topped analysts' estimates.
- Tesla (TSLA) fell nearly 1.9% ahead of the open, also hurt by the fresh tariff threats. The stock is on a four-week winning streak, but the Republican budget bill would end the EV tax credit, Barron's noted.
- Ross Stores (ROST) plunged nearly 12% early today despite earnings that beat expectations. The company withdrew its annual guidance, noting that more than half the goods it sells originate in China and it expects pressure on profitability if tariffs remain at elevated levels.
- Intuit (INTU) climbed 8% ahead of the open after providing earnings guidance that exceeded analysts' expectations.
- Humana (HUM) and UnitedHealth Group (UNH) inched higher ahead of the open after both fell sharply yesterday. Humana fell most, down more than 7.5% Thursday, as the Centers for Medicare and Medicaid Services said it would expand auditing efforts for Medicare Advantage, Barron's reported. That's the government-funded, privately managed insurance plan for U.S. seniors.
- First Solar (FSLR) slipped another 0.9% before the open after dropping 4.3% yesterday due to the Republican budget deal cutting credits for alternative energy. Sunrun (RUN), Enphase Energy (ENPH), and Solaredge (SEDG) were other industry stocks losing significant ground Thursday.
- Bitcoin (/BTC) dipped more than 2% from recent all-time highs in early futures trading, and other cryptocurrencies also declined amid risk-off sentiment in the markets following Trump's remarks. Related stocks also fell around 2%.
- As of early Friday, futures trading indicated just a 5% chance of a Fed rate cut in June, and 29% in July, according to the CME FedWatch Tool. The market bakes in high odds of two rate cuts this year. But Boston Fed President Susan Collins told Barron's yesterday she's less confident that rate cuts will be appropriate this year, citing inflation and slower growth due to tariffs.
More insights from Schwab

On the horizon: Before the holiday weekend, check the latest Schwab Washington Wise podcast for views from Schwab's Sonders on the evolving tariff picture, fiscal policies, and how the Washington turmoil is making it hard for companies and investors to plan. She also talked job numbers, GDP, and inflation as the market braces for key data after the long weekend.
The week ahead: Check the latest Schwab On Investing podcast to learn what Schwab's Sonders and Chief Fixed Income Strategist Kathy Jones will be watching in the market after the holiday weekend. Jones pointed out that the recent jump in U.S. Treasury yields came as yields rose around the world. "I'm keeping an eye on this march higher in global bonds," Jones said. "I think it's something that, as it gets going, can be self-reinforcing."
Chart of the day

Data source: S&P Dow Jones Indices. Chart source: thinkorswim® platform.
Past performance is no guarantee of future results.
For illustrative purposes only.
The S&P Utility Select Sector Index ($IXU—candlesticks) had been having a powerful month before Thursday, when it fell more than 1.4% as alternative energy stocks crumbled due to the Republican House budget bill ending many credits helping the industry. The index fell back toward its 200-day moving average (blue line), a level that represented support on a recent downturn. The sector may be in a tug-of-war as nuclear and other power plants benefit from data center demand, even as the party in power in Washington, D.C., dims the lights for companies in the sector offering renewable energy.
The week ahead
Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.
May 26: Memorial Day, U.S. markets closed.
May 27: April durable orders and April consumer confidence.
May 28: FOMC minutes and expected earnings from Abercrombie & Fitch (ANF), Dick's Sporting Goods (DKS), Macy's (M), HP (HPQ), Nvidia (NVDA), and Salesforce (CRM).
May 29: Q1 GDP second estimate and expected earnings from Best Buy (BBY), Foot Locker (FL), Kohl's (KSS), Costco (COST), Dell (DELL), Gap (GAP), Marvell Technology (MRVL), and Ulta Beauty (ULTA).
Friday, May 30: April Personal Consumption Expenditures (PCE) price index and final May University of Michigan Consumer Sentiment.