U.S. Markets Tumble as Fed Chair Comments and NVIDIA Charges Shake Sentiment
U.S. equity markets closed significantly lower on Wednesday, impacted mainly by a sharp decline in the technology sector and hawkish remarks from Federal Reserve Chair Jerome Powell. The downturn was intensified by NVIDIA’s announcement of a potential $5.5 billion charge following new U.S. export restrictions on chip sales to China.
Fed Chair Powell also highlighted growing inflationary pressure from newly imposed tariffs, which contributed to broader market caution. The S&P 500 and Nasdaq Composite declined by 2.2% and 3.1%, respectively. Meanwhile, U.S. bond yields retreated, with the 10-year Treasury yield dipping to 4.28%.
In commodities, West Texas Intermediate (WTI) crude oil increased by 2.2%, while gold gained 3.5%, reflecting a move towards safe-haven assets amid market volatility.
Consumer Data Paints a Mixed Picture
Retail Sales Rise But Sentiment Slips
Retail spending data for March provided some encouragement, with retail sales rising 1.4%, largely due to higher spending on motor vehicles. However, the consumer sentiment index has dropped to its lowest level since June 2022, suggesting caution remains prevalent amid new tariffs and an uncertain economic landscape.
Financial Sector Earnings Show Resilience
The earnings season is underway, with strong results from major U.S. banks indicating continued strength in the financial sector. Analysts forecast a 7% increase in S&P 500 earnings for the first quarter, with technology and healthcare expected to be the top-performing sectors. Concerns persist, however, that tariffs may reduce corporate margins and constrain growth for the remainder of the year. If trade pressures subside, the U.S. government could shift towards pro-growth policies such as tax reform and deregulation, potentially aiding equities later in 2025.
Global Market Movement in Response to U.S. Developments
Asia Markets Edge Higher
Asian equities mostly moved upward on Thursday, shrugging off Wall Street’s losses after Powell’s warning about trade tensions affecting inflation and growth. Hong Kong’s Hang Seng Index rose 1.62%, Japan’s Nikkei advanced 0.87%, and South Korea’s Kospi gained 0.76%. However, India’s Nifty 50 and Sensex opened slightly lower.
U.S. Futures Hold Steady
U.S. equity futures remained stable overnight following the recent decline, as investors continue to monitor rising trade tensions and Powell’s cautious policy remarks. Market volatility is expected to persist while traders assess the broader implications of tariffs and uncertain interest rate trajectories.
Europe Closes Lower Amid Tech Sector Losses
European equity markets ended in the red on Wednesday, led by losses in semiconductor stocks following ASML’s cautionary statement regarding U.S. tariffs and NVIDIA’s multi-billion-dollar charge. The STOXX 600 index slipped 0.2%, weighed down by a 2% drop in the tech sector. Energy companies helped balance the decline, while Heineken climbed after exceeding sales expectations.
Currency and Bond Market Reactions
The U.S. dollar index rose above 99.5 on Thursday, reversing earlier losses as markets recalibrated expectations around Fed policy amid trade headwinds. The euro traded at $1.1367, with investors digesting Powell’s comments that tariffs might elevate inflation and delay rate reductions.
The 10-year Treasury yield stayed above 4.3%, steady after three consecutive days of declines, as markets weighed Powell’s views and stronger-than-expected March retail data. Caution remained as market participants awaited updates from U.S.-China trade negotiations.
Oil Prices Climb on Supply Concerns
Oil prices advanced Thursday morning due to worries over tightening supply driven by new U.S. sanctions on Iran and potential OPEC+ production cuts. Despite reductions in demand and price forecasts from OPEC, the IEA, and major financial institutions, prices remained buoyed by optimism surrounding potential progress in U.S.-China trade talks. Oil is now up more than 2% for the week.
Trade Talks and Bilateral Agreements
U.S.-Japan Negotiations Continue
U.S. President Donald Trump reported “big progress” in trade talks with Japanese officials on Wednesday. Led by Japan’s Economic Minister Ryosei Akazawa, both sides are working toward a deal before the current 90-day tariff pause expires. Japan is pushing for quick resolution on export tariffs, especially in the automotive sector.
U.S.-Ukraine Minerals Agreement in Progress
Ukraine and the United States have reached “substantial progress” in discussions over a minerals deal, according to Ukrainian First Deputy Prime Minister Yulia Svyrydenko. A memorandum is expected soon, aiming to foster mutual economic growth. However, further steps are needed before Ukraine’s parliament can ratify the final agreement.
Equities in Focus: Key Stock Moves and Analyst Actions
Several companies experienced notable stock price movement due to earnings, analyst commentary, and strategic developments:
- ASML maintained its annual outlook but flagged tariff uncertainty for 2025–2026. Q1 net bookings missed estimates, and Q2 sales guidance disappointed analysts. Shares dropped 5.2%.
- Heineken exceeded Q1 sales expectations and reaffirmed its annual guidance. Despite global tariff-related volatility, it saw strong demand in markets like Vietnam and a rise in premium brand sales.
- Rheinmetall CEO Armin Papperger projected the company’s order book could grow to €300 billion by 2030, citing increased European defense spending. Talks are ongoing with Volkswagen to potentially convert the Osnabrück plant for defense manufacturing, though no deal is imminent.
- Hertz soared 56% during trading, with an additional 34% jump after-hours, following news that Bill Ackman’s Pershing Square Capital Management acquired 12.7 million shares worth $46.5 million.
- Lyft announced plans to acquire FreeNow for €175 million (approx. $197 million) to expand operations in Europe. The app will continue functioning across 150 cities, with the deal set to close in H2 2025.
- BNP Paribas downgraded Tesla, slashing 2026 earnings estimates by 38% and cutting the price target to $137, citing demand softness, rising costs, and risk from U.S.-China tensions and potential loss of EV tax credits. Piper Sandler also lowered its target to $400, expecting a weak Q1 but maintaining a positive long-term view based on AI and self-driving developments.
- Morgan Stanley cut its Microsoft price target to $472 from $530, pointing to reduced demand in Azure and Microsoft 365, but retained an “Overweight” rating. Long-term GenAI prospects still support the stock’s attractiveness.
- TD Cowen downgraded LVMH to Hold from Buy and reduced its target to €500 from €840, citing weakening discretionary spending in China and the U.S., margin pressure, and slower growth in major segments.
- Mizuho upgraded Cloudflare to “Outperform,” emphasizing strong sales momentum and growing adoption of its Workers AI platform. Although the price target was adjusted to $135 from $140, the firm sees strong positioning in the AI space.
- Morgan Stanley upgraded the U.S. defense sector, anticipating a $1 trillion defense budget and increased arms exports. Top picks include Northrop Grumman, while Lockheed Martin also received a target boost. General Dynamics was downgraded due to tariff exposure and contract risks.
Economic Calendar and Corporate Earnings
Key data releases and corporate updates scheduled for today include:
- Trade balance adjustments
- March Producer Price Index (PPI)
- ECB interest rate decision
- U.S. building permits
- Housing starts
- Initial jobless claims
- Philadelphia Fed business outlook
On the earnings front, results are expected from TSMC, Netflix, Hermès, L’Oréal, among others.
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