When Federal Reserve Chairman Jerome Powell delivers speeches, he typically employs meticulous language to outline the economic conditions. He aims to avoid unsettling the markets and often speaks extensively about the Fed’s dual mandate of maintaining stable prices and ensuring maximum employment.
On Wednesday, Powell deviated from his usual composed demeanor to address the impact of the Trump tariffs. His remarks had an immediate effect on the stock market, causing stocks to fall sharply. However, futures trading suggested the possibility of some relief buying in the near future.
Powell, speaking at the Economic Club of Chicago, indicated that tariffs are likely to result in at least a temporary increase in inflation, with potential for more sustained inflationary effects. He foresaw a challenging near-term period and expressed uncertainty about the Fed’s ability to achieve its mandate in the coming months.
For weeks, Powell had been emphasizing a similar theme: the Fed would be hesitant to cut interest rates amid the volatile conditions created by the tariffs and the broader U.S. economy. This message did not sit well with traders, as evidenced by the negative market reaction.
After an initial rally, the stock market sold off, with the Dow Jones Industrial Average plunging by as much as 1,000 points before recovering to a loss of nearly 700 points, or 1.7%, closing at 39,669.3. This marked the Dow’s tenth 600-point loss or more in 2025.
The S&P 500 Index dropped 121 points, or 2.2%, to 5,275.70, and the Nasdaq Composite Index fell 515 points, or 3.1%, to 18,257.64. Powell’s comments coincided with a slump in Nvidia’s shares, which dropped 6.9% to $104.49 after the company revealed it might incur a $5.5 billion charge due to potential restrictions on selling certain products to China.
Advanced Micro Devices saw a 7.4% decline for similar reasons, and ASML Holding, a key manufacturer of chip-production equipment, cited tariff uncertainties for weaker-than-expected new orders, leading to a 7.1% drop in its share price to $643.93. Tesla shares also fell by 4.9% to $241.55.
The Dow is down 5.6% in April and 6.8% for the year, the S&P 500 has decreased by 6% in April and 10.3% for the year, while the Nasdaq has dropped 5.7% this month and 15.6% for the year. However, interest rates remained relatively stable, with the 10-year Treasury yield decreasing slightly from 4.339% on Tuesday to 4.289% on Wednesday, having reached nearly 4.6% a week ago as foreign investors seemed to reduce their Treasury holdings.
Thursday’s trading session might provide an opportunity for a potential dip rally, which would be positive for stocks on the last trading day of the week. The stock market will be closed for Good Friday, and trading volume might be lighter as many investors prepare for Easter and the final days of Passover, which concludes on Saturday. A long weekend could offer a chance for market participants to regroup before trading resumes.
