US market analysis: S&P 500 and DJIA drop 17% and 9.94% in 2025 due to tariffs, rising yields, and weak sentiment. Explore sectoral impacts and Fed outlook.
Since February 4, 2025, the US financial markets have experienced significant declines, a brief recovery, and a subsequent sharp fall, resulting in a challenging market environment as of April 7, 2025. This analysis examines the performance of the S&P 500 and Dow Jones Industrial Average (DJIA), alongside detailed sectoral impacts, consumer sentiment trends, inflation, the US dollar index, and the Federal Reserve’s 2025 rate outlook. New tariffs and rising Treasury yields have emerged as key factors driving these market shifts.
US Stock Market Overview: February to April 2025 Performance Breakdown
Initial Decline: February 4 to Early March 2025
The S&P 500 had its downturn from 5,950 on February 4, reaching a high of 6,120 on February 19, before declining to 5,520 by March 13—a ~10.55% reduction. The DJIA followed a similar trajectory, falling from a near all-time high of 45,018 to 40,678, dropping by ~10%.
This initial drop was influenced by weakening consumer confidence. Key sentiment indices reflected growing public concern:
- University of Michigan Consumer Sentiment Index (UMCSI): Fell to 68.9 in February from 74.2 in January.
- Conference Board Consumer Confidence Index (CCI): Dropped to 94.5 from 98.1.
- Bloomberg Consumer Comfort Index: Decreased to 44.8 from 47.2.
These shifts were particularly pronounced in key US regions like the Midwest, where retail traffic and service spending declined.
Dead Cat Bounce: Mid-March to March 26, 2025
A brief upturn occurred between mid-March and March 26, often termed a “dead cat bounce”. The S&P 500 rose to 5,800 by March 26, a 3.3% increase from 5,608, while the DJIA advanced to 42,225, gaining 874 points or 2.1% from 41,350. The Nasdaq increased by 5% to 18,186 from 17,322, supported by a 4% rise in Nvidia shares.
Consumer sentiment showed slight improvement:
- UMCSI reached 70.1
- CCI rose to 95.8
- Bloomberg index climbed to 45.6
This recovery was largely driven by short-term buying, not fundamental strength. Trading volumes remained 15% below the 20-day average. Sectoral gains:
- Technology: +4.2%
- Consumer Discretionary: +3.8%
- Utilities: +0.2%
Renewed Fall: Late March to April 7, 2025
Markets resumed their downward slide post-March 26. By April 7:
- S&P 500: Fell to 5,080, a 17% drop from the February peak.
- DJIA: Declined to 38,314, down 9.94% year-to-date.
- Nasdaq: Dropped 19% YTD to 15,587, entering bear market territory.
Consumer sentiment plummeted:
- UMCSI: 66.4
- CCI: 92.5
- Bloomberg: 42.3
The decline was catalyzed by the announcement of a 10% tariff on all imports effective April 9, and a rise in the 10-year Treasury yield to levels of 4.7%(current – ~4.2%), which intensified investor caution.
Sector-Wise Losses in the S&P 500: What’s Behind the Fall?
| Sector | Decline (%) | Notable Company Impact |
|---|---|---|
| Technology | -14% | Apple -11% ($350B), Microsoft -9% ($270B) |
| Consumer Discretionary | -8.9% | Amazon -8.5% ($180B), Ford -12% ($6B) |
| Real Estate | -5.2% | Prologis -6.8% ($8B), Simon Property -7% ($5B) |
| Consumer Staples | +1.5% | Hershey +3.4% |
Why the pressure?
- Higher Yields: The 10-year Treasury yield rose from 3.9% in January to 4.7%, pushing mortgage rates to 7.1%. Cap rates in commercial real estate narrowed to just 50 bps over Treasury yields—a stress signal.
- Borrowing Costs: Higher yields made bonds more attractive, reducing demand for growth stocks.
- Stronger Dollar: DXY rose to 103.04, reducing foreign revenue conversions by 2-3%.
Inflation, Dollar Index, and the Fed’s 2025 Dilemma
Inflation remains a point of contention. The Consumer Price Index (CPI) was at 2.7% YoY in November 2024, above the Fed’s 2% target. This was driven by:
- Shelter costs: Up 4%( including primary rent, owner’s equivalent rent, and lodging)
- Insurance and maintenance costs rising across key metros like Phoenix and Miami
The Fed, having cut rates by 100 bps in 2024 to 4.25%-4.5%, has paused further action in 2025 amid tariff-related inflation risks. Market expectations now suggest:
- 76% chance of a 25-basis-point cut by June 2025.
- Total 2025 rate cuts revised down to 110 bps (from 150 bps pre-tariff).
Quick FAQs: US Stock Market Outlook in 2025
Q: Why is the US real estate sector under pressure in 2025?
A: Rising Treasury yields have pushed mortgage rates to 7.1%, making property purchases and leasing more expensive. Major REITs like Prologis and Simon Property Group have seen valuations drop over $13 billion combined.
Q: How are consumer sentiment indexes performing in 2025?
A: UMCSI, CCI, and Bloomberg Comfort Index have all declined since February 2025, signaling growing anxiety about inflation, jobs, and rate uncertainty.
Q: What impact have tariffs had on markets?
A: The 10% import tariff announcement triggered a risk-off sentiment, increased inflation expectations, and contributed to the largest one-day DJIA drop of 2,231 points on April 4.
Current Market Conditions: April 7, 2025 Snapshot
As of April 7, the S&P 500 and DJIA have lost $5 trillion in combined value since February, reflecting a 17% and 9.94% YTD decline, respectively. Technology and consumer discretionary sectors are leading the losses, while consumer staples offer relative stability.
With declining consumer sentiment, new tariffs, rising Treasury yields, and a strong dollar, investors should brace for a prolonged period of market volatility.