By Megan Leonhardt | Tuesday, May 6

Health Check. Investors are expressing renewed worry about trade policy as President Donald Trump continued to float additional tariff plans, sending markets to their second consecutive day of declines. 

The Dow Jones Industrial Average dropped 390 points, just shy of 1%. The Nasdaq Composite was down 0.9% and the S&P 500 fell 0.8%.

After the threat of 100% tariffs on movies produced outside the U.S. weighed on stocks yesterday, Trump said today that tariffs on pharmaceuticals would be unveiled in the next two weeks.

But the bigger issue for healthcare stocks today came from news out of the Food and Drug Administration. The agency named Dr. Vinay Prasad as its top vaccine regulator, replacing the recently departed Peter Marks. Prasad has been a critic of the drug industry, stoking new concerns about vaccine and drug approvals going forward. The SPDR S&P Biotech ETF finished the day down 6.6%, for its worst one-day loss since May 2022. The healthcare sector was the S&P 500's biggest loser on the day, down 2.8%. 

Here's how Barron's Josh Nathan-Kazis covered the news: 

Prasad, a hematologist-oncologist and a professor at the University of California San Francisco, has been a vocal, combative voice in hot-button medical debates. He has a YouTube page, a Substack, a podcast, and an account on X, and is often harsh and sharp-elbowed in his commentary.

He will replace Marks as director of the Center for Biologics Evaluation and Research, the FDA division responsible for vaccine approvals, among other things. Marks’s forced departure in March led to a biotech selloff, and a small revolt in some corners of the sector.

Meanwhile, the sector-specific tariffs that Trump has highlighted this week come as the administration has yet to announce new trade deals, and tariffs on China remain at levels that arguably act as an embargo.

While tariffs will remain top of mind, investor focus tomorrow will turn to the Federal Reserve and how it plans to address the effects of trade policy and other changes on the real economy. More on that below.

DJIA: -0.95% to 40,829.00
S&P 500: -0.77% to 5,606.91
Nasdaq: -0.87% to 17,689.66

The Hot Stock: Constellation Energy +10.3%
The Biggest Loser: Moderna -12.3%

Best Sector: Utilities +1.2%
Worst Sector: Healthcare -2.8%

A 'Boring' Meeting

The news is anything but boring these days, but as all eyes turn to the Federal Reserve tomorrow, the central bank may deliver exactly that. Certainly don't expect any fireworks. 

The Federal Open Market Committee will conclude its two-day meeting Wednesday. During the March meeting, we got an update on the committee’s economic projections, but that’s not on tap for this meeting. Instead, it’s just a statement on the rate decision, an update on the balance sheet, and the press conference from Fed Chairman Jerome Powell.

It's widely expected that the central bank will keep the target range for the federal funds rate steady at 4.25% to 4.5%, even as markets, businesses, and everyday Americans increasingly worry about the state of the economy.

So why hold rates steady? Even though economic growth contracted in the first quarter, much of the so-called “hard economic data” around labor and spending is still pretty good. The labor market has continued to hold steady, adding 177,000 jobs in April. Moreover, although we got a bit of progress on cooling inflation in March, price growth remains above the Fed’s 2% target. 

So expect Powell to spend time reiterating that policy is well positioned “for the time being.” Depending on the tone and context, that could very well indicate that a rate cut isn't on the June agenda either.

Several recent speeches from voting members have skewed hawkish, prioritizing the Fed’s mandate of protecting price stability over full employment, writes James Egelhof, chief U.S. economist for BNP Paribas Securities.

“This is likely to leave the Fed in a holding pattern until the hard data weakens. For now, the U.S. economy remains resilient, and we’re penciling in a cautious Fed that may deliver one or two rate cuts before year-end,” Egelhof notes.

The committee will issue its rate decision at 2 p.m. ET, followed by Powell's press conference at 2:30. Tune into Barrons.com then for in-depth coverage of all the Fed news.