US stocks plummeted on Wednesday as investors faced the harsh reality of President Trump’s tariffs. Federal Reserve Chair Jerome Powell delivered a stark warning about the potential impact of these policies, which could lead to stagflationary effects and higher inflation.
Powell warned that the uncertainty hitting the economy would have “challenging” impacts, adding that the central bank will wait for greater clarity before considering interest rate adjustments. This sent shockwaves through financial markets, leading to a 2.2% drop in the S&P 500, a 1.7% decline in the Dow Jones Industrial Average, and a 3% fall in the Nasdaq Composite.
The tech-heavy Nasdaq was particularly affected by new chip provisions, with AI chip leader Nvidia (NVDA) revealing $5.5 billion in charges due to US government restrictions on its exports to China. AMD also reported potential costs of up to $800 million. Both Nvidia and AMD fell about 7% on the day.
Policy uncertainty has been a driving force behind the recent market sell-off, with economists predicting that Trump’s policies will boost inflation and slow economic growth. “Recession odds are climbing even further as Powell pushes back the timing of cuts,” said Neil Dutta, head of economics at Renaissance Macro.
Powell also denied the notion of a “Fed put,” or a level of stock market sell-off where the Fed would intervene to calm markets. Instead, he described the current market environment as one of volatility and uncertainty. As earnings season progresses, it’s likely that more companies will warn about higher costs due to Trump’s tariffs.
The slide in Nvidia shares was seen as emblematic of the issues driving the stock market lower over the past month. “This is uncertainty,” said Steve Sosnick, chief strategist at Interactive Brokers. “And uncertainty is a killer for a company.”
Source: https://finance.yahoo.com/news/stocks-resume-sell-off-as-tariff-costs-hit-tech-and-powell-delivers-starkest-warning-yet-on-trumps-trade-war-202622781.html