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The Magnificent 7 tech stocks plunged, leading the overall market lower for a second day, after Jerome Powell warned about the effect of President Donald Trump’s new tariffs, but said the Federal Reserve won’t race to cut interest rates.
“It’s now becoming clear tariff increases will be significantly larger than expected, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth,” the Fed chair said at the Society for Advancing Business Editing and Writing conference.
Stocks extended their declines after Powell spoke on Friday. The S&P 500 index ended the day down almost 6%, with the Nasdaq Composite dropping 5.8% and the Dow Jones Industrial Average shedding 2,231 points, or 5.5%. Stocks had their worst day in five years on Thursday, and then did so again on Friday.
Nvidia (NVDA+0.54%) and Apple (AAPL+2.21%) each dropped about 7.3%. Declines in the other Mag 7 stocks were 5% for Meta (META-1.69%), 4.1% for Amazon (AMZN-1.08%), 10.4% for Tesla (TSLA+1.13%), 3.5% for Microsoft (MSFT+0.24%), and 3.2% for Google parent Alphabet (GOOGL+1.23%). Energy companies, including Exxon Mobil (XOM+0.42%), Chevron (CVX-0.27%), and ConocoPhillips (COP+0.32%), plunged on recession fears.
Powell said the size and duration of the tariff effects are uncertain and that policymakers “don’t need to be in a hurry” to make decisions on monetary policy, he added. “We’re going to need to wait and see how this plays out.”
Trump, via Truth Social, again called on Powell to cut rates and accused the studiously neutral Fed chair of playing politics. He’d earlier said via social media that his “POLICIES WILL NEVER CHANGE” after insisting on Thursday that “it’s going very well” and that “the markets are going to boom.”
Nonetheless, Nike led a rebound in some shoe and garment makers’ shares, gaining 4.3% midday, after Trump said that he’d held a “very productive call” with Vietnam’s leader and that trade talks were possible. The shoemaker, which sources about half its production in the Southeast Asian country, was up 3% at market close.
Earlier on Friday, Beijing imposed imposed 34% tariffs on all American goods, matching Trump’s duties, and took other measures, including restricting exports of some rare earth materials and barring some U.S. companies from doing business in China. The EU has yet to announce any retaliation.
Additionally, employers added 228,000 jobs in March on a seasonally adjusted basis, rising from a downwardly revised 117,000 in February and beating the average estimate of 130,000. The jobless rate nonetheless increased to 4.2% from 4.1%, and hourly wages increased 0.30%, both matching projections.
The better-than-expected jobs numbers for March are relics of a bygone era in the U.S. economy and won’t stand in the way of the Fed cutting interest rates later this year, economists said.
“Mounting uncertainty and consequential investment paralysis will likely lead them to an easing bias in the second half of 2025,” Jefferies (JEF+2.36%)’ chief U.S. economist Thomas Simons wrote in a note to clients. The Fed’s policy in this cycle has been reactive, however, so it’s likely to stay on hold for now, he added.