A Tough Day on Wall Street
Wall Street suffered a sweeping sell-off on Tuesday, with major indexes posting their worst performance in months. The S&P 500 dropped 2.2% to 5,275.70, the Nasdaq sank 3.1% to 16,307.16, and the Dow Jones Industrial Average closed down 1.7% at 39,669.39. Even small-cap stocks weren’t spared, with the Russell 2000 slipping by 1%.
Nvidia Dragged Down by Chip Export Restrictions
Among the biggest losers was Nvidia, which took a hit after announcing that U.S. trade restrictions on AI chip exports to China could wipe out $5.5 billion in revenue. The company revealed that sales of its H20 chips, specifically made for the Chinese market to comply with previous export rules, would be severely affected by the latest policy changes.
“It’s just not good. We don’t want to go backwards,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “You’re taxing the consumer and businesses at a time when the economy is already starting to slow.”
Powell’s Warning Deepens Market Worries
Federal Reserve Chairman Jerome Powell fueled the fire, warning that these tariffs will raise inflation and slow economic growth. This was said during a period when the market was already anxious about the Fed’s interest rate trajectory.
“If the economy continues to perform broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said.
“But we’ll need greater confidence that inflation is moving sustainably toward 2% before it would be appropriate to do so.”
The timing of these tariffs has raised eyebrows across the financial world, with concerns about their effects on both consumers and the broader economy.
Global Impact and WTO Concerns
The World Trade Organization weighed in as well, slashing its forecast for global trade growth from 2.7% to just 0.2%. The WTO warned that aggressive protectionist measures like these tariffs could reverse years of trade expansion.
“A modest trade rebound is anticipated in 2025, with growth of 3.3%,” the WTO said. “But this depends on improved economic conditions and reduced trade tensions.”
Investors Flee to Safety
With stocks tumbling and economic uncertainty rising, investors flocked to traditional safe havens. Gold soared past $3,300 an ounce, reaching an all-time high, while government bonds also saw renewed demand.
What It All Means for You
The most recent market decline is an indication of how volatile investor sentiment continues to be with escalating geopolitical tensions and economic uncertainty. With intensifying trade conflicts and central banks taking a wait-and-see approach, the next few months will put the market’s strength to the test.
