Overview:
On Wednesday, U.S. stocks ended sharply lower following a warning from Nvidia regarding steep charges from new U.S. curbs on chip exports to China, coupled with Federal Reserve Chair Jerome Powell’s remarks that U.S. economic growth appears to be slowing. Powell’s comments about higher inflation and slower growth due to tariffs sparked further selling in an already strained market.
Nvidia announced it would take a $5.5 billion charge following the U.S. government’s decision to limit exports of its H20 artificial intelligence chip to China, a crucial market for its popular chips. This is part of the broader U.S.-China trade tensions, which have escalated with China retaliating by raising tariffs on U.S. goods.
Fear & Greed Index:
Fear – With escalating trade tensions and a more uncertain economic outlook, investor sentiment has turned cautious, leading to increased volatility.
Key Indices (Closed Prices):
- Dow Jones Industrial Average: -1.73% at 39,669.39
- S&P 500: -2.24% at 5,275.70
- Nasdaq Composite: -3.07% at 16,307.16
Sector Performance:
Winners:
- Healthcare: A few health-related stocks saw gains, despite the broader market losses.
Losers:
- Technology/Semiconductors: Nvidia plunged by 6.9% following its warnings about export restrictions, while the semiconductor index fell 4.1%. AMD and other chipmakers were also negatively impacted by the new U.S. curbs.
Key Movers:
- Nvidia (NVDA): Fell 6.9% as the company announced a $5.5 billion charge due to the U.S. restrictions on chip exports to China.
- AMD (AMD): Dropped 7.3% alongside Nvidia as the new trade restrictions hit the semiconductor sector.
- ASML (ASML.AS): Saw declines after the company warned that increased tariffs were leading to heightened uncertainty in its outlook.
Economic Data:
- Economic Growth Concerns: Jerome Powell confirmed that larger-than-expected tariffs would likely lead to higher inflation and slower economic growth, though the Fed will wait for more data before adjusting interest rates.
- U.S.-China Trade Tensions: The trade conflict remains a key focus, with tariffs continuing to escalate, affecting major companies like Nvidia and AMD.
Outlook:
The market remains under pressure as investors grapple with slowing growth and higher inflation risks due to the ongoing trade war. The uncertainty surrounding the tariffs is expected to continue to weigh heavily on investor sentiment. As the situation evolves, companies are likely to report the impacts of these tariffs, further influencing the market. Investors will need to navigate a period of heightened uncertainty as the market reacts to new policy developments.