Market Recap: Monday, July 7, 2025
The stock market retreated sharply from record highs on Monday as renewed concerns about global trade tensions sent investors into risk-off mode. The Dow Jones Industrial Average fell 422 points, or 0.9%, while the S&P 500 dropped 0.8% and the Nasdaq Composite declined 0.9%.
Small-cap stocks were hit particularly hard, while low-volatility names showed more resilience during the session. The major indexes managed to trim some of their losses in the final 15 minutes of trading, but the damage was already done as markets today grappled with renewed uncertainty.
Tariff Concerns Reignite Market Volatility
The primary catalyst for today’s market decline was a flurry of tariff threats from President Donald Trump. Investors were caught off guard when Commerce Secretary Howard Lutnick announced that Trump’s previously announced reciprocal tariffs would now take effect on August 1, rather than July 9 as originally expected.
Market volatility increased after Trump posted several letters to world leaders promising tariffs ranging from 25% to 40% starting on August 1 if trade deals aren’t reached before then. The president also threatened an additional 10% tariff on any country “aligning themselves with the Anti-American policies of BRICS” in a social media post on Sunday evening.
The CBOE Volatility Index (VIX) spiked about 9% to just under 18, though this remains well below the reading of 60 seen during the initial April tariff announcements.
Tech Sector Faces Pressure Despite Recent Strength
Technology stocks, which had been leading the market higher in recent weeks, faced selling pressure on Monday. The sector had broken out on June 24, helping drive the broader market to new highs as semiconductor giants like Nvidia (NVDA) and Broadcom (AVGO) rallied on continued AI investment expectations.
Tesla (TSLA) was among the day’s biggest decliners, with shares falling nearly 7% in pre-market trading after CEO Elon Musk announced the formation of a new political party.
Despite today’s pullback, the tech sector had shown remarkable strength in the previous week, with several positive developments:
– Hewlett Packard Enterprise (HPE) settled an antitrust case, allowing its acquisition of Juniper Networks to proceed
– Cadence Design (CDNS) and Synopsys (SNPS) received permission to resume business with China
– Oracle (ORCL) continued to reach new highs after CEO Safra Catz indicated a strong start to the fiscal year
Market Breadth and Technical Indicators
Prior to today’s selloff, market breadth had been improving, with the number of S&P 500 components trading above their 200-day moving averages reaching the highest level since late January. The advance/decline line had also been making new highs, potentially confirming the recent breakout.
However, Justin Walters of Bespoke Investment Group noted that “the market came into this week trading very extended,” with 57.2% of S&P 500 stocks in overbought territory. He suggested that “further downside mean reversion” could be expected until these overbought levels are worked off.
Sector Performance and Notable Movers
While most sectors declined on Monday, there had been notable strength in cyclical stocks during the previous week. Materials were the top-performing sector, led by Packaging Corp. of America (PKG) after it announced an acquisition expected to boost earnings immediately.
Financials had broken out to new highs following successful stress tests that cleared major banks to return more capital to shareholders through dividends and stock buybacks. Travel stocks also performed well after Carnival (CCL) beat earnings estimates, while strong gaming revenue from Macau boosted casino operators like Wynn Resorts (WYNN) and Las Vegas Sands (LVS).
Ford Motor (F) had posted its biggest weekly gain in two years after announcing that vehicle sales rose 14% in the second quarter, along with a 1.8 percentage point gain in market share.
Health insurers remained a weak spot in the market, with Centene (CNC) experiencing its biggest weekly drop ever after reporting higher-than-expected medical costs. Related company Molina Healthcare (MOH) also fell on similar concerns.
Looking Ahead: Economic Calendar and Earnings
The economic calendar is relatively light this week, which could leave markets vulnerable to further volatility if additional tariff threats emerge. However, any progress on trade deals that reduces the proposed levies would likely be welcomed by Wall Street.
Earnings season is set to begin in earnest next week, with major financial institutions typically among the first to report. The upcoming earnings calendar shows several notable companies reporting in early August, including McDonald’s (MCD), Uber Technologies (UBER), and Walt Disney (DIS).
Global Market Implications
Global stocks have essentially flatlined over the past month after outperforming domestic stocks by a wide margin in the first half of the year. The threat of tariffs as high as 50% on European goods could pose additional risks to international markets.
Andrew Brenner, head of international fixed income at NatAlliance Securities, noted concerns about increased government spending and higher deficits in the short term following Trump’s tax bill. While he doesn’t “detect much vigilantism at the moment,” he acknowledged that “it is out there.”
Market Outlook
As investors digest the latest developments on trade policy and prepare for the upcoming earnings season, market volatility could remain elevated in the near term. The S&P 500 had risen in seven of the nine trading days prior to Monday’s decline, suggesting that some consolidation might be expected after such a steady advance.
The main takeaway from today’s market action is that while stocks have shown remarkable resilience in recent weeks, reaching new record highs despite ongoing uncertainties, trade tensions remain a significant risk factor that could quickly shift market sentiment. Investors will be closely watching for any developments on trade negotiations ahead of the new August 1 deadline, as well as positioning themselves for what could be a pivotal earnings season in determining the market’s direction through the remainder of the summer.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.