The New York Stock Exchange ended sharply lower on Wednesday, weighed down by a gloomy outlook from the US Federal Reserve and escalating trade tensions between Beijing and Washington.
The Nasdaq index, which features many technology companies, fell by 3.07%, the broader S&P 500 index lost 2.24%, and the Dow Jones dropped 1.73%.
Opening in the red, the US market was further dampened by comments from Federal Reserve Chairman Jerome Powell, who suggested that tariffs imposed by President Donald Trump are creating a “complicated situation in which our two goals are in tension.”
'At least a temporary rise in inflation'
The Federal Reserve has a dual mandate of maintaining inflation near its long-term goal of 2% and ensuring economic conditions that foster full employment.
Jerome Powell turned what was a moderately down day into a rather dramatic slide, Jack Albin of Cresset Capital commented.
Speaking at a Chicago Economic Club event, Powell noted that tariffs are likely to cause at least a temporary rise in inflation, with the potential for persistent inflationary effects.
“The scale of the tariffs exceeds anything the Fed has modelled,” Christopher Low of FHN Financial remarked.
The market ignored the acceleration of retail sales in March, which were up by 1.4% to $734.9 billion.
Volatility index rises by over 10%
In the bond market, the yield on 10-year US Treasury bonds eased to 4.28% at 20:20 GMT (22:20 Brussels time), down from 4.33% the previous day.
The volatility index VIX, known as the fear gauge, which measures investor nervousness, rose by more than 10%.
The semiconductor sector, already hit by the ongoing trade war initiated by Trump, was further impacted by Powell’s remarks. Industry giants Nvidia and AMD fell by over 10% during the session, losing 6.87% and 7.35% respectively by close of trading.
Nvidia has lost nearly a quarter of its market value since Donald Trump’s inauguration in late January.
Trade war anxiety re-emerges
Taiwan Semiconductor Manufacturing (TSMC) dropped by 3.60%, and Broadcom fell by 2.43%.
According to Marc Chandler of Bannockburn Global Forex, trade war anxiety has re-emerged following Beijing’s measures against Boeing and the US requirement for Nvidia to obtain export licences.
In a document submitted to the SEC, Nvidia stated that the US government informed it last week that it needed a licence to export certain artificial intelligence (AI) chips to China and other countries.
Massive share purchase sends Hertz soaring by over 56%
China, in a tit-for-tat response to US tariffs, suspended all deliveries of US-manufactured Boeing aircraft, although Boeing shares rising by 0.57%.
Elsewhere, car rental company Hertz soared by 56.44% after investor Bill Ackman’s fund purchased 12.7 million shares in the group.
US carrier United Airlines remained steady, gaining 0.01%, after stating it does not anticipate any direct impact on new aircraft prices due to the newly imposed US import tariffs.
