[New York Stock Market] Nvidia Setback and 'Powell Put' Hopes Dashed Lead to Decline... Nasdaq Down 3%

Semiconductors Plunge Following Nvidia... AMD Down 7%
Powell: "Tariffs Are High... Inflation and Growth Slowdown"

The three major U.S. stock indices in New York all fell on the 16th (local time). The market plunged after Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), stated that there was no intention to intervene in the market, and the U.S. government placed Nvidia's H20 chip, which led the stock market last year, on the export control list against China.

On that day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 39,669.39, down 699.57 points (1.73%) from the previous trading day. The S&P 500, focused on large-cap stocks, fell 120.93 points (2.24%) to 5,275.7, and the tech-heavy Nasdaq dropped 516.01 points (3.07%) to close at 16,307.16.

Reuters Yonhap News

The Trump administration's restriction on Nvidia chip exports to China heightened concerns about the U.S.-China trade war, affecting investor sentiment. Nvidia announced the previous day that it had been notified by the U.S. government that a license would be required to export the H20 chip to China. Due to these export restrictions, Nvidia expects a loss of $5.5 billion in the first quarter. Following this news, Nvidia's stock closed down 6.87%. AMD and Micron Technology fell 7.35% and 2.41%, respectively. ASML dropped 7.06% after reporting first-quarter order results that fell short of market expectations.

Zachary Hill, Head of Portfolio Management at Horizon Investments, said, "The S&P 500 is an index where tech stocks move more than in the past. Whether rising or falling, it has a disproportionate impact. We saw that effect last week, and now we are seeing the opposite."

Powell's remarks also dampened market expectations. In a public statement that day, Powell warned that the Trump administration's tariff policies are expected to cause inflation and slow growth, and the Fed may face a situation where it must choose whether to focus on inflation or growth. He said, "The level of tariff increases announced so far by the administration is much higher than expected," adding, "The economic impact is likely to be the same, including rising inflation and slowing growth." He continued, "We may face a challenging scenario where the two major goals (maximum employment and price stability) are in tension."

As the stock market plunged, expectations for the so-called 'Fed put' or 'Powell put,' where the Fed intervenes to stabilize the market, were dashed. Powell said, "The market is functioning as intended and maintaining order," indicating no intention to intervene.

Adam Phillips, Investment Officer at EP Wealth Advisors, said, "If you are waiting for the Fed to support the market with a 'Fed put,' it is better to expect a lower strike price as long as inflationary pressures remain high," adding, "Do not expect monetary policy to support the market for the time being."

Beth Hammack, President of the Federal Reserve Bank of Cleveland, said that interest rates should be maintained at the current level until clear results emerge regarding the impact of the Trump administration's tariff policies.

U.S. retail sales in March increased by 1.4% compared to the previous month, marking the highest figure in two years. However, Bloomberg and others explained that this was due to tariffs rather than an improvement in consumer sentiment.

By sector, all sectors except energy declined. Technology plunged 3.94%, discretionary consumer goods fell 2.69%, and communication services dropped 2.48%.

According to the Chicago Mercantile Exchange (CME) FedWatch, Wall Street estimates a 29.7% probability that the benchmark interest rate will remain unchanged until the end of June.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) rose 2.52 points (8.37%) from the previous session to 32.64.

U.S. Treasury yields declined. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 3.3 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.29%, and the U.S. 2-year Treasury yield, sensitive to monetary policy, dropped 4.4 basis points to 3.784%.