Stocks opened lower Wednesday and stayed there through the close. A strong March retail sales report could not quiet investors’ skittishness and selling accelerated after Federal Reserve Chair Jerome Powell said that the central bank remains in no rush to cut rates.
Ahead of the opening bell, the Census Bureau said that retail sales rose 1.4% month over month in March – a notable jump from February’s 0.2% increase and the biggest monthly gain since January 2023.
The impressive growth was driven by a 5.3% month-over-month increase in sales of cars and auto parts. Excluding these, retail sales were up 0.5%.
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While today’s solid retail sales report would typically “be a good thing for markets, it is very possible that consumers are front-loading their purchases and we may be seeing an artificial bump in sales,” says Chris Zaccarelli, chief investment officer for Northlight Asset Management.
The front-loading of purchases came in the lead-up to President Donald Trump’s Liberation Day, where he announced sweeping retaliatory tariffs, and sparked a historical stock market sell-off. Most of these tariffs have since been paused, but only temporarily.
Zaccarelli notes that the “uncertainty over tariff policy may be causing even more damage than any policies” that the Trump administration may eventually implement.
Powell talks rate cuts in speech today
Uncertainty over the Trump administration’s plans for tariffs and how that’s impacting the markets isn’t keeping Fed Chair Powell up at night.
In a Q&A session at the Economic Club of Chicago this afternoon, Powell said that “markets are doing what they’re supposed to do,” and that the Fed will not intervene if the stock market plummets.
Powell also said that while the economy is “moving away” from the central bank’s dual mandates for price stability and full employment, the Fed is “well-positioned to wait for greater clarity” before making changes to current monetary policy. In other words, it’s in no hurry to cut interest rates prematurely.
This was certainly not what market participants wanted to hear. At the close, the blue chip Dow Jones Industrial Average was down 1.7% at 39,669, the broader S&P 500 was off 2.2% to 5,275, and the tech-heavy Nasdaq Composite was 3.1% lower at 16,307.
Nvidia leads tech stocks lower
All but one of the 11 S&P 500 sectors finished lower today – energy being the outlier.
And tech stocks bore the brunt of the selling after artificial intelligence (AI) chipmaker Nvidia (NVDA) late Tuesday said it will incur a $5.5 billion charge in its first-quarter results.
This is after the U.S. government told the chipmaker that it will need new licenses to export its H20 processors to China and other countries.
“While NVDA has historically adapted to export controls by developing China-specific products, we estimate that this development puts about 8% to 10% of the company’s revenue tied to China servers at risk,” says CFRA Research analyst Angelo Zino.
Nvidia stock fell 6.9% today, losing $188 billion in market value. For context, this is the entire market cap of blue chip stock Verizon Communications (VZ, -1.9%).
Fellow chip stocks Advanced Micro Devices (AMD, -7.4%) and Broadcom (AVGO, -2.4%) also sold off.
