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U.S. markets fell sharply Wednesday, with chip stocks leading the retreat as U.S.-China trade tensions spooked investors. The tech-heavy Nasdaq closed down 3.1%, the S&P 500 lost 2.2%, and the Dow Jones Industrial average fell 700 points, or 1.7%. Losses rippled across sectors, dragging the Russell 2000 down 1.4%.
Nvidia stock plunged 6.9% after the company disclosed a $5.5 billion charge linked to fresh U.S. export restrictions on its H20 AI chips — once seen as a workaround for earlier bans. AMD (AMD+2.02%) stock fell 7.4%, while chip equipment giant ASML dropped 7% after it missed first-quarter revenue estimates and warned that escalating tariffs could cloud the global outlook through 2026.
Markets retreated further as Federal Reserve Chair Jerome Powell warned that President Donald Trump’s tariffs were “highly likely” to fuel inflation, and suggested the central bank will wait to gauge their effect before lowering interest rates.
“Tariffs are highly likely to generate at least a temporary rise in inflation,” Powell said during a speech at the Economic Club of Chicago. “The inflationary effects could also be more persistent. 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.”
“For the time being,” Powell said, “we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”
Still, there were bright spots. Abbott Labs (ABT+0.90%) beat earnings expectations with adjusted EPS of $1.09 and double-digit organic growth in its medical device division, including a 20% jump in diabetes-related products. Prologis (PLD+2.62%), the world’s largest industrial REIT, met forecasts with $1.27 in core FFO and reaffirmed guidance — but noted rising customer caution.
Meanwhile, U.S. retail sales surged 1.4% in March, the biggest monthly gain since January 2023. Analysts said shoppers likely pulled purchases forward to avoid tariff-driven price hikes: Think customers loading up on TVs and T-shirts at Costco (COST+2.17%) ahead of potential price pain.
The CNN (WBD+0.75%) Fear & Greed Index remains in “extreme fear” territory — a mood that’s proven hard to shake since Trump’s tariff barrage earlier this month. It should come as no surprise: This is a market increasingly driven by policy whiplash, cheerleading soundbites, and dropped hints of trade negotiations. Mixed signals, selective leaks, and sudden reversals — often via social media or offhand remarks — are proving as influential as official announcements.
And it’s not just the policy that’s unpredictable. The choreography is, too.
The most closely watched story Wednesday centered on Nvidia (NVDA+0.54%), the third-largest U.S. company by market capitalization, and its disclosure of the $5.5 billion charge tied to new U.S. government restrictions on exporting its AI chips to China. The Biden administration originally designed export controls to curtail China’s access to advanced AI chips — but under Trump, the policy has sharpened.
Also in chips news, semiconductor equipment giant ASML (ASML+1.37%) reported first-quarter sales of €7.7 billion, or about $8.7 billion— below analyst expectations — and flagged “greater uncertainty” ahead due to tariffs. ASML, which makes the machines essential to high-end chip manufacturing, has seen its stock fall by 28% over the last year despite the AI boom.
Elsewhere, China posted 5.4% GDP growth for the first quarter, matching the prior quarter. Export activity surged as companies rushed to ship goods ahead of expected new U.S. tariffs. Beijing also named a new top trade negotiator.
Still, market watchers seemed to see little clarity ahead.