Market Review: Stocks Fall on Bond Market Jitters, Trade Tensions

Some analysts believe the recent market recovery is still intact.

Traders work on the floor of the New York Stock Exchange on May 19, 2025. Spencer Platt/Getty Images

U.S. stocks slid this week, led by small caps, as bond and trade uncertainty weighed on markets.

The S&P 500 Index ended May 23 at 5,802, down by 2.61 percent for the week. The Dow Jones Industrial Average fell by 2.47 percent to close at 41,603. The Nasdaq declined by 2.47 percent to 18,737 while the Russell 2000 dropped by 3.47 percent to close at 2,039.

Market bears returned from a couple of weeks of hibernation on May 19, as news of Moody’s downgrade of U.S. debt hit the wires over the weekend and a deadlock over the next government budget in the U.S. Congress dominated headlines that morning.

Moody’s is the third credit rating agency to downgrade U.S. debt, raising questions about the status of U.S. Treasuries as safe-haven assets. This pushed yields higher, with the 10-year Treasury bond yield edging toward 4.60 percent on the morning of May 19.

Meanwhile, JPMorgan Chase CEO Jamie Dimon raised concerns about the state of the U.S. economy and financial markets during the firm’s conference day, adding to the negative sentiment in the market.

However, the Treasury bond market jitters eased by the afternoon as Wall Street analysts dismissed the Moody’s downgrade as old news.

“Moody’s downgrade may grab headlines, but for global investors, it’s a moment to recalibrate—not retreat,” Ankit Shrivastava, founder and managing partner of Enventure, told The Epoch Times.

“While the U.S. credit rating downgrade is an important reminder of rising U.S. debt levels and fiscal deficits, the stock market has experienced and survived credit rating downgrades in the past,” Clark Geranen, chief market strategist of Danville, California-based CalBay Investments, told The Epoch Times.

“While volatility may be ahead over the near-term, we believe investors should remain invested and not make specific portfolio decisions based on headlines.”

Bond yields eased by late afternoon on May 19, helping equity markets turn mixed—a trend that continued into the May 20 trading session.

Bond market jitters returned on May 21 following a disappointing auction of the Treasury Department’s newly issued $16 billion in 20-year bonds, sending yields higher across maturities and pushing equities lower.

Later in the week, the revival of trade tensions between the United States and Europe, along with renewed talk of tariffs on imported smartphones, further contributed to bond market unease.

Trading during the week was highly volatile, with the Chicago Board Options Exchange Volatility Index spiking above 20.

The week’s biggest losers were interest-rate-sensitive stocks, such as homebuilders, as higher bond yields pushed mortgage rates higher to the 7 percent mark. For instance, Toll Brothers stock dropped by 2.80 percent despite reporting better-than-expected earnings and revenue.

Regional bank shares also declined, as these banks are major holders of Treasury bonds, which lose value when yields rise. The SPDR S&P Regional Banking ETF fell by 4.79 percent for the week.

Deckers Outdoor Corporation and Ross Stores—whose shares fell by 21 percent and 10 percent, respectively, on disappointing profits—and Apple, which slid 7.57 percent on renewed tariff concerns over smartphones, were among the week’s losers as well.

Still, there were several big weekly winners, mostly story stocks. One notable example is CoreWeave, Inc., which rose by 27.95 percent on news of a significant stake acquired by Nvidia.

Oklo, Inc., whose shares increased by nearly 30 percent, was another winner, thanks to Washington’s support for its nuclear business.

Shares of United States Steel Corporation also jumped by 28.9 percent after Washington approved its partnership deal with Nippon Steel.

Looking ahead to next trading week, which is one day shorter than usual due to Memorial Day, traders and investors will likely focus on the upcoming Treasury bond auctions on May 28 to assess whether recent bond market jitters were an aberration or indicative of deeper concerns.

Meanwhile, the U.S. government will release the second estimate of first-quarter GDP and new Personal Consumption Expenditures inflation data on May 29, providing some clarity on the direction of the U.S. economy.

Geranen remains unperturbed by the current bond market and trade jitters.

“If there’s anything that April showed us, it’s that making investment decisions based on headlines can be very dangerous and harmful to long-term investment returns,” he said.

He believes the recent market recovery is still intact.

“The stock market’s dramatic recovery over the past six weeks suggests that the market is starting to look ahead to a post-tariff world, where we have trade deals in place and lower across-the-board tariff rates,” he said.

“We would not be surprised to see new record highs in stocks this summer.”