Wall Street ends sharply lower; Nvidia drops, Powell says growth appears to be slowing

U.S. stocks ended sharply lower on Wednesday as Nvidia warned about steep charges from new U.S. curbs on its chip exports to China and as Federal Reserve Chair Jerome Powell said U.S. economic growth appears to be slowing.

Powell, in remarks for the Economic Club of Chicago, said larger-than-expected tariffs likely mean higher inflation and slower growth. But he noted that the U.S. economy is still in a solid position, and that the Fed is waiting for greater clarity before considering policy changes.

Stocks added to declines from earlier in the day after Powell’s comments, with Nvidia and other chipmaker stocks among the biggest decliners.

“Powell is confirming what investors have been worried about, and that is the likelihood of slowing economic growth and more stubborn inflation as a result of the tariffs,” said Sam Stovall, chief investment strategist at CFRA Research.

An index of semiconductor stocks was down sharply.

Nvidia said late on Tuesday it would take $5.5 billion in charges after the U.S. government limited exports of its H20 artificial-intelligence chip to China, a key market for one of its most popular chips.

According to preliminary data, the S&P 500 lost 120.84 points, or 2.24%, to end at 5,275.79 points, while the Nasdaq Composite lost 513.57 points, or 3.05%, to 16,309.60. The Dow Jones Industrial Average fell 695.17 points, or 1.72%, to 39,673.79.

The U.S. and China have been going back and forth in a tariff battle in recent weeks.

Also on Wednesday, Dutch chip-making tools giant ASML warned that the tariffs had led to increased uncertainty about its outlook.

Traders on Wednesday kept bets on Federal Reserve rate cuts this year after Fed Chair Jerome Powell said the U.S. central bank is well-positioned to wait for greater clarity before making any changes to the stance of policy.

Traders of short-term interest-rate futures are betting the Fed resumes rate cuts in June and that by year end the policy rate, currently in the 4.25%-4.50% range, will be a full percentage point lower.

“Obviously it was a difficult decision. The market was much more torn - as were economists - than is normal ahead of a Bank of Canada decision, and understandably so, given the intense uncertainty. ... He’s clearly laid open the possibility of getting a lot more aggressive if the economy deteriorates substantially. ... As long as Canada isn’t the prime target for the trade war, I think that the Canadian dollar actually can improve here because the U.S. dollar is likely to remain under pressure over the next year in terms of yields.”

“Today’s decision is in line with our expectation, but the Bank of Canada did seem a bit dovish on what is coming next, and I would reference today’s decision to (BoC Governor Tiff) Macklem’s March speech. We thought the bank was clearly laying out what their approach was going to be for conducting policy in an environment of trade uncertainty. And given that the economic data that we have seen in Canada has not been that negative, we did not think there was tangible evidence of a slowdown or clarity on the future path of the economy for the bank to preemptively cut rates, and they are weary about stoking inflation again. Therefore, we looked for a hold and it materialized. I do expect weakness to pile up, and the Bank will be forced to cut rates again. I think if you read in between lines there is a tinge of regret around allowing policy to remain too easy for too long following the pandemic and they would very much not like to repeat that mistake again.”

“While consensus had been split ahead of today’s rate announcement, we do not think it should come as a surprise that the Governing Council chose to pause its easing cycle in this latest decision.”

“Granted, headline inflation undershot expectations yesterday - this was largely the result of gasoline and travel prices, both of which should be discounted in BoC thinking. More importantly, underlying inflation metrics remain elevated, and are yet to reverse a surprise uptick seen in the February data.”

“We think the Governing Council would have liked to pause easing in March to assess disinflation progress but were prevented from doing so by Trump (administration) tariff risks. With these having faded somewhat for Canada post-Liberation Day, and with a stronger loonie limiting imported inflation pressures, policymakers now have an opportunity to take stock.”