Today’s Market ActionThe stock market retreated on Wednesday, May 21, 2025, as all three major indexes closed lower, ending their recent winning streaks amid concerns over President Trump’s proposed tax-cut bill and lingering worries about U.S. fiscal prudence following a recent sovereign credit rating downgrade.
Major Market Indexes Take a Breather
The S&P 500 fell 0.4% to close at 5,940.46, snapping a six-day winning streak. The Dow Jones Industrial Average (DJI) dropped 0.3% or 114.83 points to finish at 42,677.24, ending a three-day run of gains. Meanwhile, the tech-heavy Nasdaq Composite slid 0.4% to 19,142.71, breaking a two-day winning streak.
This pullback comes after a strong rally in recent weeks that had pushed the S&P 500 and Dow back into positive territory for 2025, as concerns about tariffs and their potential economic impact subsided amid strong corporate earnings.
Why Is the Market Down Today?
Market sentiment turned cautious following Moody’s May 16 downgrade of the U.S. sovereign credit rating by one notch to Aa1 from Aaa. Moody’s cited the growing burden of financing the federal government’s outstanding budget deficit of approximately $36 trillion and rising costs of rolling over existing debt in the high-interest rate environment.
The downgrade triggered a spike in Treasury yields, with the 10-year Treasury note yield climbing to 4.49%, up slightly from yesterday’s close of 4.48%. Higher yields can pressure stock valuations, particularly for growth-oriented technology companies.
Sector Performance and Notable Stock Movements
Eight out of ten broad sectors in the S&P 500 ended in negative territory. The Energy Select Sector SPDR (XLE) was among the worst performers, falling 0.9%, while the Consumer Staples Select Sector SPDR (XLP) bucked the trend, rising 0.4%.
Among individual stocks, Airbnb (ABNB) was a notable decliner, with shares dropping 3.3%.
Home Depot (HD) shares finished 0.6% lower after the home improvement retailer reported first-quarter revenue that topped analysts’ expectations but fell slightly short of profit estimates.
Upcoming Market Events to Watch
Investors are looking ahead to several significant events that could impact market direction:
1. **Key Earnings Reports**: Intuit (INTU), TD Bank (TD), and Analog Devices (ADI) are scheduled to report earnings on Thursday, May 22.
2. **Federal Reserve Workshop**: The Federal Reserve Bank of New York and Columbia University will host a joint workshop on May 22 focusing on the unwinding of large central bank balance sheets in the post-pandemic period and the associated impact on financial markets and the broader economy.
3. **Cryptocurrency Movements**: Bitcoin traded at $106,400 in late-afternoon trading on Tuesday, up from an earlier low of $104,200, edging closer to its January record high of approximately $109,000.
Market Outlook
Despite today’s pullback, the broader market has shown resilience in recent weeks. The CBOE Volatility Index (VIX), often referred to as the “fear gauge,” was down 0.3% to 18.09, suggesting relatively moderate investor anxiety.
Trading volume was lighter than usual, with 16.14 billion shares traded on Tuesday, below the last 20-session average of 17.38 billion, potentially indicating a lack of conviction behind the selling pressure.
As investors digest recent economic data and corporate earnings, market attention will likely remain focused on inflation trends, Federal Reserve policy signals, and the potential economic impact of proposed fiscal policies in the coming days.