Wall Street Plummets 1.73% as Trump's Trade Policies and Powell's Caution Spark Volatility

Wall Street faced a double blow as President Trump's unpredictable trade policies and Federal Reserve Chairman Powell's cautious stance on monetary policy created a challenging environment for investors. The market's reaction was evident as major indices experienced significant declines. The Dow Jones Industrial Average fell by 699.57 points, or 1.73%, closing at 39,669.39. The Nasdaq Composite dropped by 516.01 points, or 3.07%, ending at 16,307.16. The S&P 500 index declined by 120.93 points, or 2.24%, closing at 5,275.70.

Tech giants, including NVIDIA, Meta, Alphabet, and Tesla, were among the hardest hit, with NVIDIA's stock price falling by 6.9%. The "fear gauge" VIX surged above 30, indicating heightened market volatility. The ripple effects of Trump's global trade war were becoming increasingly apparent across various sectors. Companies with strong ties to global supply chains, such as NVIDIA, warned of potential impacts on their bottom lines. Even airlines began preparing for an uncertain summer travel season.

Jean-Christophe Babin, CEO of Bulgari, a luxury jewelry brand under the LVMH group, highlighted the growing uncertainty surrounding U.S. tariff policies. "What was true yesterday may not be true today, and who knows what tomorrow will bring," he stated. Meanwhile, the Federal Reserve's current "wait-and-see" approach left investors seeking reassurance on monetary policy. Powell emphasized that the Fed would wait for more economic data before adjusting interest rates, while cautioning that Trump's tariff policies could further disrupt inflation and employment targets.

Powell's remarks came after Trump temporarily suspended some of the more stringent retaliatory tariffs. Powell noted that recent market volatility was a reasonable response to the dramatic shifts in the administration's trade policies, rather than a signal for the Fed to intervene. He stressed that controlling inflation remained a priority, suggesting that the Fed might prioritize inflation control over employment if the two goals conflicted. Powell also denied the existence of a "Fed put," where the central bank would intervene during market downturns, stating that market volatility was expected given the high level of uncertainty.

Market participants had anticipated that Powell would signal a potential rate cut, but his cautious stance disappointed many. Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, expressed frustration, noting that Powell did not provide clear guidance on how the Fed would address unemployment through rate cuts. Art Hogan, chief market strategist at B. Riley Wealth Management, pointed out that the market had already been under pressure due to negative news about NVIDIA and other tech stocks, and Powell's comments only exacerbated the situation.

Beyond the stock market, the dollar and gold also saw notable movements. The Bloomberg Dollar Index fell to its lowest level since October 2022, reflecting a decline in sentiment towards U.S. risk assets. Gareth Ryan, managing director at IUR Capital, noted signs of long-term damage to investor confidence. Gold prices surged by over $110 in a single day, marking the strongest performance since October 2023. This surge highlighted the growing appeal of gold as a safe-haven asset amidst market uncertainty.

In summary, the dual challenges posed by Trump's trade policies and Powell's cautious approach created a volatile environment for Wall Street. The market's reaction underscored the need for clear guidance from both the administration and the Federal Reserve to stabilize investor sentiment and mitigate the impact of ongoing uncertainties.