Investing.com– The S&P 500 closed sharply lower Wednesday, pressured by a Nvidia-led slump in tech and remarks from Federal Reserve Chairman Jerome Powell signaling that the Fed isn’t leaning toward cutting rates any time soon.
At 4:00 p.m. ET (21:00 GMT), the fell 699 points, or 1.7%, the index dropped 2.2%, and the slipped 3.1%.
Powell signals rate cuts aren’t coming soon as inflation remains key focus
Federal Reserve Chairman Jerome Powell said Wednesday that the Fed was focused on ensuring the impact of tariffs only has a one-time boost to inflation, dashing investor hopes that the central bank could lean toward rate cuts to cushion the potential blow to the economy.
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said in prepared remarks at the Economic Club of Chicago.
Powell’s remarks paled in comparison to those from Fed Governor Christopher Waller, who on Monday said that if the impact of tariffs threatens a deep economic slowdown, then he would back a sooner rate cut even if it is accompanied by a jump in inflation.
Nvidia falls after flagging $5.5B hit from China export curbs
Nvidia (NASDAQ: ) stock fell over 6% after the AI darling said it would be hit by $5.5 billion in charges following a Commerce Department decision to limit exports of its H20 AI chip to its key Chinese market.
The H20 is the main AI chip Nvidia is permitted to sell in China under restrictions originally imposed by the Biden administration, as the U.S. sought to close off Beijing’s access to cutting-edge advancements in AI tech.
Nvidia’s announcement spooked other chipmakers and technology stocks, amid concerns over even more export restrictions on China, which is embroiled in a bitter trade war with Washington.
Chip-rival, AMD (NASDAQ: ) also warned of hit to profit from the China export curbs, forecasting a writeoff of $800M, sending its shares more than 7% lower.
The warnings from the duo of chipmakers come on the heels of Dutch semiconductor equipment ASML Holding NV (AS: ) warning of softer demand from China after reporting net bookings for Q1 that fell short of estimates.
Other chipmakers and AI stocks, including Intel (NASDAQ: ),and Broadcom (NASDAQ: ), also fell, while major Nvidia supplier TSMC (NYSE: ) retreated.
Elsewhere, Travelers Companies (NYSE: ) stock rose more than 1% despite the insurer’s profit plunging 60% in the first quarter as its exposure to the Los Angeles wildfires led to a record catastrophe loss of over $2 billion.
United Airlines (NASDAQ: ) stock was flat after the carrier said forward bookings were stable so far in the current quarter despite tariff-induced economic uncertainty.
Hertz (NASDAQ: ) stock soared over 56% following the news that Bill Ackman’s Pershing Square (NYSE: ) Capital Management took a bigger-than-initially expected stake in the car rental company.
Alphabet (NASDAQ: ) stock dropped nearly 1% with its Google unit facing a class action lawsuit in the U.K., for potential damages exceeding £5 billion ($6.6 billion), over allegations the U.S. tech giant has been abusing its near-total dominance in the online search market.
Retail sales surged in March
U.S. retail sales surged in March, increasing 1.4% last month after an unrevised 0.2% gain in February, as households boosted purchases of motor vehicles ahead of tariffs.
Motor vehicle manufacturers reported a big jump in auto sales in March, attributed by some to a rush by buyers “to try and beat the tariffs.”
The stronger retail sales data encouraged some economists to boost their estimates of economic growth. “As a consequence, we’re revising up our GDP forecast to +1.0% from +0.6%,” Jefferies said in a Wednesday note.
(Peter Nurse, Ambar Warrick contributed to this article.)
