Nasdaq Composite Faces Turbulence Amid Trade Tensions and Credit Downgrade

The Nasdaq Composite experienced significant volatility in May 2025, influenced by escalating trade tensions, fiscal policy developments, and a historic credit rating downgrade.

Market Overview

On May 23, President Trump announced a 50% tariff on all EU imports and a 25% tariff on foreign-manufactured smartphones, targeting companies like Apple and Samsung. This move, aimed at addressing stalled EU trade negotiations and criticized Apple for offshoring production, led to a 6% drop in Apple shares for the week. The Nasdaq Composite mirrored this decline, falling 2.5% over the same period. Barron's

The following day, May 24, saw a modest recovery, with the Nasdaq Composite closing at 18,196.22, up from the previous day's low of 17,771.19. However, the market remained jittery, reflecting ongoing concerns about fiscal policy and its potential impact on economic stability.Barchart.com

Credit Rating Downgrade

Adding to the market's unease, Moody's downgraded the U.S. government's last remaining triple-A credit rating to Aa1 from Aaa, citing a long-term rise in government debt and interest payment ratios. This development caused U.S. stock futures to fall, with the Nasdaq Composite decreasing by 230 points (0.5%) on May 25.

Tech Sector Developments

Tech stocks experienced significant volatility in the past week, with the Nasdaq Composite down 2.5% and the S&P 500 dropping 2.6%. Contributing factors included continued earnings reports, the U.S. losing its top credit rating per Moody's, rising treasury yields, and trade policy updates from President Donald Trump. Key tech sector events included announcements from Microsoft and Alphabet focusing on artificial intelligence initiatives. Microsoft highlighted its AI agents, while Google introduced AI Mode into its search engine to compete with generative AI tools. Apple stock fell 7.6% over the week, triggered by OpenAI's $6.4 billion acquisition of a Jony Ive-owned start-up, stirring competition concerns, followed by Trump's threat to impose a 25% tariff on U.S.-sold iPhones unless they are manufactured domestically. Barron's

Market Outlook

Investors remain cautious, monitoring tariff developments and key economic reports like the upcoming core PCE inflation data. While the market showed some resilience amid recent volatility, concerns about fiscal policy, trade tensions, and credit ratings continue to weigh on investor sentiment.

As of the latest data, the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100 Index, is trading at $414.12, reflecting a slight decline from the previous close. The ETF's performance mirrors the broader market's response to the aforementioned economic and policy developments.

Investors are advised to stay informed about ongoing developments and consider their positions carefully in light of the current market uncertainties.

Nasdaq Composite Performance Tablefinance.fyicenter.com+2Barchart.com+2macrotrends.net+2

Data sourced from Yahoo Finance and Barchart.com.Barchart.com

Note: All prices are in USD.