Uncertain Signals: Trade War, Fed Stance, and Market Resilience Collide

April 15, 2025

Markets Drop as Powell Dashes Hopes for Fed Rescue

Equity markets sold off sharply today after a double hit of negative trade news and hawkish comments from Federal Reserve Chair Jerome Powell:

Powell Dashes Hopes

• Dow Jones: –1.7%

• $S&P 500(.SPX)$ : –2.2%

• $NASDAQ(.IXIC)$ : –3.1% (Nasdaq trimmed losses in the final 30 minutes with a late 1.4% bounce)

The session started with modest losses after chipmakers disclosed billions in charges tied to new export restrictions on AI technology headed to China. Later, Powell’s remarks added fuel to the fire:

Key Powell Quotes: “Tariffs increase costs.” “Markets are functioning as expected in times of high uncertainty.” “The bar for intervention remains high.” “Stagflation is a growing risk.”

His bottom line: The Fed is staying on hold and won’t intervene to cushion the market from tariff-related volatility.

Nvidia, AMD Take $6.3B Hit from China Export Controls

Tech stocks, particularly semiconductor names, were hammered after:

• $NVIDIA(NVDA)$ announced a $5.5B charge related to US restrictions on AI chip exports to China.

• $Advanced Micro Devices(AMD)$ followed with an $800M charge, citing similar impacts.

Intel has begun notifying Chinese customers that licenses may soon be required for advanced chip sales — part of President Trump’s ongoing escalation.

The Fed’s Tightrope: Confidence in Inflation Path Is “Not There Yet”

In remarks , Chair Powell warned of a potential “stagflation scenario” caused by higher consumer prices and weaker labor conditions stemming from tariffs.

He also rejected the idea of rate cuts in response to recent market stress, noting that:

• The Fed must see “greater confidence” that inflation is falling before acting.

• Further rate cuts could risk worsening unemployment caused by tariff-related cost pressures.

The Fed may be sidelined for now — and that leaves markets on their own to navigate near-term policy uncertainty.

Morning Briefing Recap: Themes Driving Market Sentiment

1. Sentiment Split: VIX High, Valuations Higher

• VIX spiked to 30, a strong signal of investor fear.

• But the S&P 500 is still trading at 19.7x forward earnings — a surprisingly optimistic valuation given trade and policy uncertainty.

• Powell’s hands-off stance may now force markets to discipline trade rhetoric by reacting sharply to policy missteps — something already unfolding.

2. Dollar Dynamics

• The dollar is down 4.0% YTD, after a strong Q4 2024 (+6.6%).

• Still +3.9% for the full 2024–2025 period, and remains well within the range for a global reserve currency.

• Expect further modest declines, particularly if international demand for US assets weakens on political risk.

Looking Ahead: Key Events & Data

• Earnings on deck: Bank of America, Citigroup, United Airlines, and Johnson & Johnson.

• Economic indicators: Watch closely for retail sales, PPI data, and any Fed commentary that might soften Powell’s hawkish tone.

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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.