The stock market experienced significant declines as tariff concerns resurfaced, with key indexes falling due to the initial impacts reported by tech companies from the U.S. trade war with China.
The trading day concluded poorly, with chipmakers outlining revenue challenges stemming from the trade conflict with China, compounded by a speech from Federal Reserve Chair Jerome Powell. His remarks reignited apprehensions about the stagflationary implications of the tariffs.
The S&P 500 index dropped by 2.2%, predominantly driven by a tech sector selloff. The Dow Jones Industrial Average decreased by 1.7%, while the Nasdaq Composite, which is heavily populated with technology stocks, fell 3.1%.
Nvidia’s stock closed 7% lower following the announcement that restrictions imposed by former President Donald Trump would lead to $5.5 billion in lost revenue. The policy renders the billion-dollar company unable to export a crucial chip to China, which analysts believe accounts for about 10% of its revenue. Competitor Advanced Micro Devices also saw its shares decline by 7% after acknowledging that these export restrictions could negatively impact its revenue by up to $800 million.
The existing trade policy uncertainties were highlighted by Jerome Powell’s speech on Wednesday afternoon, during which he cautioned that tariffs would pose a “challenging scenario” for the Federal Reserve, resulting in “higher inflation and slower growth,” potentially leading to stagflation.
Powell commented on the unprecedented nature of the current U.S. trade policy in a speech delivered to the Economic Club of Chicago.
Bond yields adjusted downward in response to Powell’s statements, reflecting investors’ concerns over a potential U.S. recession. The yield on the 10-year Treasury note decreased to 4.27% by the end of the day, down from 4.35% in the morning session, and 4.48% from the previous week when bond markets were severely impacted by trade war concerns.
Powell highlighted that “Markets are struggling with a lot of uncertainty, and that means volatility.”
The U.S. dollar appreciated against the euro on Wednesday, although it has depreciated by approximately 6% over the past month as investors reassess its reliability as a safe-haven currency. Meanwhile, gold prices remained close to their record high at $3,352 per troy ounce.
Earlier reports indicated that retail sales figures showed many consumers bought cars, electronics, and other significant items last month in anticipation of price increases due to tariffs.
Currently, the U.S. maintains a base tariff rate of 10% for most countries, with combined tariffs on Chinese goods reaching 145%. Goods imported from Canada and Mexico face tariffs as high as 25%, while tariffs on imported automobiles, steel, and aluminum also stand at 25%. In retaliation, China recently imposed a 125% tariff on U.S. goods. These tariff measures are expected to elevate consumer prices and have contributed to a decline in consumer sentiment for the fourth consecutive month.
This report was originally published on Fortune.com.
