U.S. stocks dropped sharply on Wednesday as the impact of President Trump’s tariffs became clearer. The market sell-off gained momentum in the afternoon, following a stark warning from Federal Reserve Chair Jerome Powell. Powell highlighted the potential long-term damage of tariffs, adding that they could lead to stagflation a combination of stagnant growth and rising inflation.
During his speech in Chicago, Powell said the uncertainty surrounding the tariffs was challenging for the economy. He also emphasized that the Federal Reserve would “wait for greater clarity” before considering any rate cuts. Powell’s comments added to the growing economic uncertainty, making it less likely that the Fed would act quickly to support the economy with lower rates.
The S&P 500 fell by 2.2%, while the Dow Jones dropped 700 points, or 1.7%. The Nasdaq Composite took the hardest hit, falling more than 3%. The tech sector was particularly affected, with major companies like Nvidia and AMD warning of the financial impact of new U.S. export restrictions on China.
Nvidia disclosed that the new restrictions would cost the company $5.5 billion. AMD followed suit, stating that the provisions could cost it up to $800 million. Both stocks dropped about 7% during the day. As a result, economic uncertainty continued to grow, putting pressure on investors.
This uncertainty has been a key driver of the market downturn in recent weeks. Analysts believe the combination of inflationary pressure and slowed economic growth could lead to a recession. Powell’s refusal to promise a rate cut further increased concerns.
Interactive Brokers’ chief strategist, Steve Sosnick, noted that Nvidia’s decline symbolized the broader issues facing the market. He explained that the current uncertainty is a significant challenge for companies across sectors.
As earnings season progresses, it’s likely that other companies will issue similar warnings about higher costs. For many businesses, economic uncertainty remains a serious concern that could weigh on future performance.
In summary, the markets are grappling with growing uncertainty. As Powell stated, “Markets are doing what they’re supposed to do,” but the outlook remains highly unpredictable.
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