U.S. stocks moved firmly lower in early Wednesday trading, with the dollar slumping to a fresh three-year trough amid the latest trade war salvo in the tech sector and further flight-to-safety trades that suggest more market uncertainty over the coming weeks.
Updated at 2:08 PM EDT
Fed Chair Powell, when asked during the panel discussion at the Economic Club of Chicago even if the central bank would consider action simply to support the stock market, responded with little ambiguity:
“I’m going to say no, with an exclamation point …”
Updated at 1:49 PM EDT
Federal Reserve Chairman Jerome Powell warned investors that the impact of Trump administration tariffs will be larger than first expected, and likely stoke near-term inflation pressures that could persist.
Speaking at an economic event in Chicago, Powell said that, “despite heightened uncertainty and downside risks, the U.S. economy is still in a solid position”, adding that as he and his colleagues “learn more, we will continue to update our assessment” and judge any potential monetary policy response.
“Tariffs are highly likely to generate at least a temporary rise in inflation …. the inflationary effects could also be more persistent,” Powell said.
“Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored,” he added.
Stocks extended declines following his remarks, with the S&P 500 last marked 115 points, or 2.14% lower on the day, with the Nasdaq down nearly 545 points, or 3.23%. The Dow was last off 592 points.
Updated at 11:48 AM EDT
A stronger-than-expected reading for March retail sales hasn’t had much affect on the Atlanta Fed’s GDPNow tracker, which pegged its first quarter contraction estimate at 2.2%, a modest improvement from the -2.4% update from last week.
Retail sales rose by 1.4% to just under $740 billion, but the tally was likely flattered by buyers looking to lock-in big-ticket purchases ahead of the expected hit from Trump administration tariffs. Auto and car part sales surged 5.3% on the month, a tally that normally reflects year-on-year gains, while the control group reading rose just 0.4%.
That leaves the GDP-feeding calculation basically flat for the first three months of the year.
Updated at 10:46 AM EDT
United Airlines (UAL) is a surprise earlier gainer after the carrier posted stronger-than-expected first quarter earnings late Tuesday and said travel demand largely holding up amid the broader economic uncertainty.
The group posted its best first quarter bottom line in five years, with record revenues of $13.2 billion, adding that ‘forward bookings over the last two weeks have remained stable, with premium cabins up 17% and international up 5% year-over-year.”
United also issued forward guidance based on its its initial assessment from earlier this year, a stable demand environment and one that factors in the risk of recession.
United Airlines shares were marked 2.1% higher on the session at $68.42 each, but remain nearly 30% south of their end-of-year levels in 2024.
Updated at 9:39 AM EDT
The S&P 500 was marked 52 points, or 0.96% lower in the opening minutes of trading, with the Nasdaq down a larger 290 points, or 1.72% with Nvidia falling 5.5%.
The Dow fell 160 points and the Russell 2000 slipped 7 points, or 0.38% following the stronger-than-expected retail sales data.
“Today’s numbers showed consumers were still spending in March, but we won’t know for another month whether they continued to open their wallets after tariffs were announced,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
“The rules of the game changed on April 2, and it’s impossible to run a pre-tariff economic playbook in a post-tariff world,” she added.
Updated at 8:25 AM EDT
Mortgage applications suffered their biggest drop of the year last week, according to data from the Mortgage Bankers’ Association, as borrowing rates surge amid the biggest Treasury bond selloff in two decades.
The MBA said 30-year fixed rates jumped 20 basis points over the period ending on April 11 to 6.81%, while new applications were down 8.5% from the prior week and refinancings fell 12%.
Higher rates are also pushing borrowers into adjustable rate mortgages, said the MBA’s chief economist Mike Fratantoni, which represented around a quarter of all of last week’s volume.
“One notable change last week was the full percentage point increase in the ARM share,” he said. “Given the jump in rates, more borrowers are opting for the lower initial rates that come with an ARM, with initial fixed rates closer to 6% in our survey last week. The ARM share at 9.6 percent was the highest since November 2023.”
Stock Market Today
Tech stocks are leading this morning’s decline, with Nvidia (NVDA) shares down more than 5.7% in premarket trading after the Trump administration unveiled new restrictions on the sale of its H20 AI chip to customers in China.
The Commerce Department also placed similar licensing requirements on the MI308 chip made by rival Advanced Micro Devices (AMD) in a move that will hammer China sales and take the current trade dispute between Washington and Beijing to another, more damaging level.
“This is just the beginning of what is going to be a long and drawn out process between the US and China with 145% reciprocal tariffs now in place (ex tech until the Section 232 hits) and the Street/market now waiting for any signs or tea leaves of some negotiations to kick off,” said Wedbush analyst Dan Ives.
China, in fact, appointed a new trade negotiator and, according to Bloomberg News, is willing to re-engage with the U.S. if President Trump and his cabinet show more “respect” to leaders in Beijing.
President Donald Trump has ordered a probe into the critical mineral sector as his tariff brief expands to a key area of tech production. Andrew Harnik/Getty Images
The trade war fallout, however, is starting to ripple through into some early first quarter earnings reports, with ASML (ASML) , the Netherlands-based maker of chip circuitry engravers that play a crucial role in semiconductor production, missing second quarter revenues forecasts and warning that tariffs will blunt near-term demand.
The President is also looking to expand his tariff strategy into the critical minerals spaces, and is currently planning schedules for both the pharmaceutical and semiconductor sectors as well.
The breadth of his tariff structure, however, and the confusing on-again/off-again nature of their start dates and exemptions, continues to unsettle business leaders and longer-term investors.
Gold prices hit a fresh all-time high of $3,318 per ounce in overnight trading, while safe-haven Treasury bonds rallied, pulling 10-year note yields 2 basis points lower to 4.341% ahead of a speech from Federal Reserve Chairman Jerome Powell later this afternoon.
The U.S. dollar index, however, continued its recent slump, falling another 0.71% in overnight trading to 99.498, the lowest since April of 2022.
On Wall Street, tech stocks are set to lead the three major indices lower, with futures contracts tied to the Nasdaq priced for an opening bell decline of around 245 points.
The S&P 500, the broadest measure of U.S. shares, is priced for a 34 point decline ahead of the Commerce Department’s March reading of retail sales while the Dow Jones Industrial Average is called 30 points lower.
In overseas markets, Europe’s Stoxx 600 benchmark fell 0.89% in mid-day Frankfurt trading, with ASML down 7% and leading tech stocks lower. Britain’s FTSE 100, meanwhile, was down 0.46% in London.
More Economic Analysis:
Overnight in Asia, a stronger-than-expected reading of first quarter GDP in China, which showed a 5.4% expansion over the three months ending in March, failed to offset trade war concerns as domestic stocks fell and the regional MSCI ex-Japan index ended 0.96% lower on the session.
Japan’s Nikkei 225 closed 1.01% as the yen rose to 142.84 against the U.S. dollar, and tech stocks fell sharply following new of export restrictions for Nvidia and AMD.
