Stocks Dive as Powell, Nvidia Add to Trade Fears

(Wednesday market close) Double-barrel trade-related trouble brewed on Wall Street Wednesday thanks to bad news from chip giant Nvidia (NVDA) and an unpleasant outlook from Federal Reserve Chairman Jerome Powell, sending stocks back into retreat after a period of relative calm.

Nvidia sank almost 7% after announcing a $5.5 billion charge reflecting the Trump administration's new requirement to obtain a special license before exporting the firm's H20 AI chips to China. The product was designed to accommodate tight U.S. export controls, but the White House is concerned it could be used to help China build a "supercomputer." Advanced Micro Devices (AMD), another chip firm, also took a charge of approximately $800 million related to the requirement.

This means a rougher road ahead for a chip sector already struggling with China's retaliatory tariffs and pressure from the Trump administration to bring some manufacturing home, a costly endeavor. Nvidia outlined plans to do exactly that on Tuesday, temporarily boosting shares before it announced the charge that analysts think could reduce earnings growth potential. The news accompanied additional pain as chip equipment maker ASML (ASML) reported lower-than-expected quarterly orders earlier Wednesday.

"The restrictions on Nvidia's H20 chip exports to China and ASML's missed orders have added to investor anxiety, sparking concerns over a potential slowdown in AI demand and the semiconductor sector," said Jeffrey Kleintop, chief global investment strategist at Schwab. "The developments have also raised concerns over the impact of tariffs on global companies, with economists scaling back their forecasts for GDP growth worldwide and the semiconductor sector being highly sensitive to economic cycles."

The chip sector was already on the run at midday when Powell spoke in Chicago and delivered the second trade-related bad news.

"The level of the tariff increases announced so far is significantly larger than anticipated," Powell said in published remarks of his speech. "The same is likely to be true of the economic effects, which will include higher inflation and slower growth."

Though he referred to "at least a temporary rise in inflation," he added that the inflationary effects of tariffs "could also be more persistent."

Powell also said data suggest U.S. economic growth slowed in the first quarter, and recent strong imports might mean businesses were trying to get ahead of tariffs. Though he didn't elaborate, this could spell lower demand in coming quarters with companies already stocked up.

Despite Powell's gloomy views on tariffs, the futures market continues to trim  odds for a rate cut in early May when the central bank next meets. Chances of a 25-basis point cut in May fell to just 14% by late Wednesday, according to the CME FedWatch tool, reflecting tough talk on inflation from both Powell and other Fed speakers.

Recent data showed consumer inflation expectations spiking, possibly due to tariff worries, and Powell reiterated the Fed's obligation "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."

Asked after the speech if there could be a "Fed put," meaning the Fed would step in to help the market if stocks continue retreating, Powell replied simply, "No."

There was relief Wednesday in one corner of the market as the benchmark U.S. 10-year Treasury note yield (TNX:CGI) fell below 4.3% after last week saw the sharpest yield rally in two decades to as high as 4.59% intraday on April 11. Though the current level is still 25 basis points above recent lows, investors seemed relieved Wednesday as a 20-year bond auction by the Treasury saw decent demand, according to Briefing.com.

Demand was also solid from U.S. consumers last month, judging from the March retail sales report investors received early Wednesday showing a 1.4% monthly rise. Analysts had expected 1.3%. With autos excluded, the increase was 0.5%, which still beat the 0.2% Briefing.com consensus.

"If it weren't for the tariffs issue, I think the market would be cheering this more," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "It rose more than expected, driven (no pun intended) primarily by motor vehicles and auto parts dealers. It's likely that consumers pulled forward auto purchases prior to the tariffs."

Other data weren't so bright, as March industrial production fell 0.3% from February and the New York Fed Services PMI slipped. The latest Atlanta Fed GDPNow model for first quarter gross domestic product (GDP) growth remains in the red at –2.2%. Weekly mortgage applications also declined. Tomorrow's initial weekly jobless claims will likely get a close look for signs of trade instability turning into layoffs. Analysts expect a relatively low 225,000, according to Briefing.com.

The World Trade Organization expects a 0.2% drop in global trade volume this year due to tariffs.

Tomorrow is a busy day to close out a short week, with markets shut Friday for the Good Friday holiday. Earnings from Taiwan Semiconductor Manufacturing (TSM), Netflix (NFLX), and UnitedHealth (UNH), a rate decision by the European Central Bank (ECB), and U.S. housing data are some of the highlights. Investors could also have their eyes on trade after reports in the media today of progress between Japan and the U.S., and that China may be open to start talking. The ECB is widely expected to trim rates by 25 basis points.

"We are likely to get a cut from the ECB tomorrow but may also hear about they are monitoring the situation and will act appropriately—which likely means another cut in June to 2% on the target rate as inflation remains tame and the risks to growth are on the downside," Schwab's Kleintop said.

U.S. Treasury markets close early tomorrow, at 2 p.m. ET, ahead of the holiday.

Technically, there's a wide range for the S&P 500^® index (SPX) between last week's 13-month low near 4,835 and the mid-March low near 5,500. "The near-term trajectory of the SPX likely depends on any announced trade deals, but in the absence of any announcements a re-test of last Monday's lows wouldn't be uncommon, historically speaking," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.

There's also a wide range in some of the earnings outlooks coming from major corporations, most of which are unsure how tariff policy might play out. With so much up in the air, United Airlines (UAL) delivered strong earnings late Tuesday but guidance that was wide enough to fly a jet through. Earnings per share could be as low as $7 or as high as $13.50 in fiscal 2025, the airline said. "It is true that the environment has gotten a lot harder," United CEO Scott Kirby said Wednesday on the company's earnings call, Bloomberg reported.

The Dow Jones Industrial Average^® ($DJI) fell 699.57 points (1.73%) to 39,669.39; the SPX dropped 120.93 points (2.24%) to 5,275.70, and the Nasdaq Composite^® ($COMP) sank 516.01 points (3.07%) to 16,307.16.

Technically, major indexes managed to close well above their intra-day lows, possibly supportive heading into Thursday's session. On the other hand, with the market closed Friday and so much trepidation around trade, it's unclear how much buying incentive investors might feel tomorrow.

- Nvidia dropped 6.87%. The new headwind on China exports makes sequential growth much more difficult, a Jefferies analyst said today, according to Barron's. China represents about 13% of Nvidia's sales.

- Other chip sector stocks also retreated, with Broadcom (AVGO) down 2.43%, Advanced Micro Devices off 7.35%, and Intel (INTC) down 3.12%. The new export restrictions on China are only the most recent in a long effort by first the Biden and now the Trump administrations to limit technology exports to the country. AMD's sales to China are also affected by the new Trump export restrictions. The PHLX Semiconductor Index (SOX) sank 4%.

- ASML lost about 7% after including disappointing near-term guidance in its quarterly earnings report. However, the firm stood by its 2025 and 2026 full-year guidance and said conversations with customers so far back its views that those will be growth years.

- Hewlett Packard Enterprise (HPE) slipped 0.87% after gaining 5% yesterday when Bloomberg reported that activist investor Elliott Management had taken a $1.5 billion position in shares of the software and networking firm.

- Tesla (TSLA) dropped almost 5% ahead of next week's first quarter earnings, hurt by trade concerns.

- While the worst tech losses affected the chip sector, many other large tech names sank today as well, including Marvell Technology (MRVL), Palantir (PLTR), Apple (AAPL), Microsoft (MSFT) and more.

- Many big banks and home builder stocks fell on worries about possible U.S. economic growth slowing.

- United Airlines (UAL) fell less than a percent after initially climbing in early trading. It beat analysts' consensus for earnings per share and reported revenues that met consensus by rising 5.4% year over year. But the first quarter was a time before tariff fears truly took hold. In a nod to the current environment, United said in its press release that it's removing four percentage points of scheduled domestic capacity starting in the third quarter and "continuing to make prudent adjustments to the utilization rate of its fleet, including ongoing reductions in off-peak flying on lower demand days."

- J.B. Hunt Transport Services (JBHT) fell 7.68% following yesterday's first quarter earnings results that slightly surpassed analysts' expectations. The company reported that demand remained strong for intermodal during the quarter, but several parts of the business saw lower revenue than a year ago.

- Travelers (TRV) added 1.13% after reporting better-than-expected earnings, though they were down from a year ago due to losses from California wildfires.

- Materials, staples, and energy firms were among the few gainers late Wednesday. However, JPMorgan Chase (JPM) downgraded U.S. Steel (X), citing trade uncertainty.

- Newmont (NEM) rose 2.51% as gold prices roared to new all-time highs above $3,300 an ounce as global trade dynamics grew more complex.

- Abbott Labs (ABT) climbed 2.76% despite just missing Wall Street's consensus expectation for first quarter sales. But earnings surpassed analysts' estimates.

- Bitcoin (/BTC) managed light gains despite a soft stock market. The cryptocurrency got a boost recently when Trump signed a bill into law that reverses a rule from the Biden administration that made decentralized finance (DeFi) platforms comply with the same tax rules as a traditional brokerage. MicroStrategy (MSTR), a stock closely associated with crypto, managed a slightly higher close.

Capitol update: With Congress in recess, representatives might hear from constituents on tariffs back home. "It will be interesting to see whether that contributes to any pushback from Congress on administration policies when lawmakers return to Washington," said Michael Townsend, managing director, legislative and regulatory affairs at Schwab, in his latest analysis. Upon return, they face tough tax and spending cut decisions.

Turbulent market conditions can make anyone worried about their portfolio, and Schwab offers several perspectives that provide ideas to keep in mind at such times:

Market Volatility: What to Do During Turbulence
Bear Market: Now What?
Market Volatility in Retirement: Are You Prepared? 
Navigating the Markets: Tariffs and Trade

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

April 17: March housing starts and building permits and earnings from Taiwan Semiconductor Manufacturing (TSM), UnitedHealth (UNH), D.R. Horton (DHI), and Netflix (NFLX).
April 18: U.S. markets closed for Good Friday holiday, no earnings or data expected.
April 21: March leading indicators.
April 22: Expected earnings from 3M (MMM), Halliburton (HAL), Tesla (TSLA), Kimberly-Clark (KMB), Lockheed Martin (LMT), Northrop Grumman (NOC), and Verizon (VZ).
April 23: March new home sales and expected earnings from Boeing (BA), AT&T (T), Philip Morris (PM), IBM (IBM), and Texas Instruments (TXN).