Market Performance
Stocks faced significant selling pressure, resulting in sharp declines across major indices. The S&P 500 decreased by 2.2%, the Nasdaq Composite fell 3.1%, and the Dow Jones Industrial Average dropped 1.7%.
Impact of NVIDIA and AMD Announcements
NVIDIA (NVDA, Financial) announced it expects first-quarter results to include up to $5.5 billion in charges related to H20 products due to export restrictions to China. AMD (AMD, Financial) also projected an $800 million impact. These announcements contributed to the negative market sentiment.
Federal Reserve Remarks
Fed Chair Powell's comments in Chicago exacerbated selling, as he indicated no expected progress on the Fed's dual mandate goals this year and dismissed the idea of a "Fed put."
Economic Data and Retail Sales
- Total retail sales increased by 1.4% month-over-month in March, slightly above the consensus of 1.3%. February's increase was 0.2%.
- Excluding autos, retail sales rose by 0.5% month-over-month, surpassing the consensus of 0.2%, with February's figure revised up to 0.7% from 0.3%.
Despite strong headline numbers, concerns arose that March's data might have been inflated by pre-tariff buying activity, potentially leading to future declines.
Sector Performance
Mega caps and semiconductor stocks led declines amid tariff-related uncertainties and growth concerns. The Vanguard Mega Cap Growth ETF (MGK) fell 3.3%, and the PHLX Semiconductor Index (SOX) dropped 4.1%. The technology sector saw the largest decline, down 3.9%, followed by consumer discretionary (-2.7%) and communication services (-2.5%).
Year-to-Date Index Performance
- Dow Jones Industrial Average: -6.8%
- S&P 500: -10.3%
- S&P Midcap 400: -12.8%
- Nasdaq Composite: -15.6%
- Russell 2000: -16.4%
Review of Economic Data
- Weekly MBA Mortgage Applications Index: -8.5%; Prior: 20.0%
- March Industrial Production: -0.3% (consensus: -0.3%); Prior revised to 0.8% from 0.7%
- March Capacity Utilization: 77.8% (consensus: 77.9%); Prior: 78.2%
- February Business Inventories: 0.2% (consensus: 0.3%); Prior: 0.3%
- April NAHB Housing Market Index: 40 (consensus: 39); Prior: 39
The decline in industrial production was primarily due to a significant drop in utilities output, overshadowing gains in manufacturing and mining.
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Today's News
Federal Reserve Chair Jerome Powell's recent remarks have heightened worries about the economic impact of tariffs, suggesting they could lead to a temporary rise in inflation. Powell noted that tariffs might strain the Fed's dual mandate of stable prices and strong employment, potentially leading to stagflation. His comments have added pressure on the already struggling market, especially impacting technology and semiconductor stocks.
Nvidia (NVDA, Financial) and Advanced Micro Devices (AMD, Financial) faced significant setbacks as the U.S. government imposed new export licensing requirements on their AI chips, part of a broader strategy to curb China's AI ambitions. Both companies saw their shares fall by 7% amid these developments, with Nvidia warning of a $5.5 billion hit to its quarterly results and AMD anticipating an $800 million impact.
The technology sector further suffered as the Nasdaq-100 index (NDX) plunged 4.1%, driven by the downturn in semiconductor stocks and Powell's hawkish comments. Nvidia's disclosure regarding the need for special licenses to export its GPUs to China contributed to the negative sentiment, causing the Philadelphia Semiconductor Index (SOX) to drop by 6.9%.
Costco (COST, Financial) announced a 12.1% increase in its quarterly dividend to $1.30 per share, payable on May 16. This move comes amid ongoing tariff risks, which have been a concern for retailers. Despite the challenges, Costco continues to show strong financial performance.
Ford (F, Financial) indicated that it might need to increase vehicle prices next month due to rising costs from tariffs on non-USMCA parts and vehicles. Although Ford has a lower exposure to U.S. trade policy compared to its Detroit counterparts, potential changes in "U.S. content" definitions could impact its pricing strategy significantly.
Meta Platforms (META, Financial) is currently engaged in a legal battle with the FTC over its acquisitions of Instagram and WhatsApp. The outcome could force Meta to divest one or both platforms, though analysts suggest the company could survive without them, focusing more on new initiatives.
Palantir Technologies (PLTR, Financial) saw its stock fall over 6.5% following Powell's warnings about tariffs. The company also announced a partnership with Citigroup (C) to enhance data utilization, aiming to improve client experiences and operational processes.
In the MedTech space, Abbott (ABT, Financial) and Baxter (BAX, Financial) are expected to be less affected by new tariffs compared to Johnson & Johnson (JNJ, Financial) and Medtronic (MDT, Financial), which face higher exposure due to their reliance on overseas manufacturing.
Progressive (PGR, Financial) reported an 18% year-over-year increase in policies in force, surpassing expectations. The company's Q1 GAAP EPS rose to $4.37, driven by a significant rise in net premiums written and earned.
Affected by Powell's comments, enterprise software stocks like Microsoft (MSFT), Oracle (ORCL), and Adobe (ADBE) also saw declines. These stocks, along with cybersecurity firms like Fortinet (FTNT) and CrowdStrike (CRWD), faced downward pressure amid the broader market volatility.
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