S&P 500

Report for 17.04

US market: Powell warns of economic slowdown. stocks drop

Major US indices on Wednesday: Dow -1.7%, NASDAQ -3.1%, S&P 500 -2.2%. The S&P 500 closed at 5,275, with a range of 5100–5800.

Key point:

The head of the US Federal Reserve gave a major economic address on Wednesday—his first since markets were rocked by President Trump's sweeping tariff announcement covering all US foreign trade and the subsequent market swings triggered by his unpredictability.

Powell warned that the US economy was likely to face both rising inflation and slowing growth at the same time. It is a combination that poses one of the most difficult scenarios for any central bank, including the Fed. He said the Fed may face some very tough decisions in the coming months.

However, Powell also stated that he believes the bond and equity markets are functioning well and that fluctuations in asset prices reflect investors adjusting to the new environment.

Ultimately, Powell said the Fed is currently in a comfortable position and will follow a wait-and-see approach. In other words, no policy changes should be expected in the near term unless the economic outlook changes dramatically.

Trading summary for Wednesday, April 16:

Stocks dropped sharply on heavy selling, causing all major indices to tumble.

The S&P 500 fell 2.2%, the Nasdaq Composite lost 3.1%, and the Dow Jones Industrial Average dropped 1.7%.

Negative sentiment persisted throughout the session following NVIDIA's (NVDA 104.49, -7.71, -6.9%) announcement that it expects to incur up to $5.5 billion in costs in Q1 due to export restrictions to China.

AMD (AMD 88.29, -7.00, -7.4%) also forecast an $800 million hit from tariffs.

Selling intensified in the afternoon following Powell's comments at a Chicago event, where he said he does not expect the Fed to make progress on its dual mandate this year and made it clear there would be no Fed put to support the market.

Wednesday morning's economic data also contributed to the bearish tone despite a solid retail sales report.

Retail sales for March rose 1.4% on a monthly basis (consensus: 1.3%) after a 0.2% increase in February.

Ex-auto sales increased 0.5% on a monthly basis (consensus: 0.2%) after February's upward revision to 0.7% (from 0.3%).

The negative takeaway is that last month's strong numbers may reflect front-loaded demand ahead of tariffs and may not be sustained.

Mega caps and semiconductor stocks led the decline amid ongoing tariff uncertainty and associated growth concerns. The Vanguard Mega Cap Growth ETF (MGK) dropped 3.3%, while the PHLX Semiconductor Index (SOX) fell 4.1%. The technology sector recorded the steepest loss by a wide margin, declining 3.9%. The next-worst performers were the consumer discretionary sector (-2.7%) and communication services (-2.5%).

Year-to-date:

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%

Economic data summary:

MBA weekly mortgage applications index: -8.5%; previous: 20.0%

March retail sales: 1.4% (consensus: 1.3%); previous: 0.2%

March retail sales ex-auto: 0.5% (consensus: 0.2%); previous revised from 0.3% to 0.7%

The complex element, and the key takeaway from the report, is that the strength in sales was largely driven by frontloading ahead of tariff measures, meaning the momentum may not be sustained.

The counterpoint here is that food services and drinking places sales rose 1.8% in March after a 0.8% drop in February.

March industrial production: -0.3% (consensus: -0.3%); previous revised from 0.7% to 0.8%

March capacity utilization: 77.8% (consensus: 77.9%); previous: 78.2%

The key takeaway from this report is that the sharp decline in utilities output overshadowed gains in manufacturing and mining output, making the overall decrease less concerning than it appears.

February business inventories: 0.2% (consensus: 0.3%); previous: 0.3%

NAHB Housing Market Index for April: 40 (consensus: 39); previous: 39

Thursday's economic calendar includes:

8:30 ET: March housing starts (consensus: 1.418 million; previous: 1.501 million),

Building permits (consensus: 1.455 million; previous: 1.456 million),

Weekly initial jobless claims (consensus: 225,000; previous: 223,000),

Continuing claims (previous: 1.850 million),

Philadelphia Fed April Survey (consensus: 10.0; previous: 12.5)

10:30 ET: Weekly natural gas inventories (previous: +57 billion cubic feet)

Energy: Brent crude at $66.20. Oil rose noticeably by about $1.50 over the day, likely due to easing concerns about a sharp global economic slowdown.

Gold is holding near new highs around $3,320 and is showing little pullback—gold should be held, and additional buying is possible on a significant daily-scale correction.

On Thursday, the ECB will announce its rate decision. Economists expect a 0.25% cut.

Conclusion:

Attention should be paid to the strong US retail sales report. Despite many believing the spike was simply frontloaded before Trump's tariffs as Powell admitted yesterday, even the Fed did not expect such aggressive increases.

Therefore, the US economy retains its main strength as consumer optimism remains intact.

Thus, at least toward the year's highs, a renewed rally is still on the table.

We continue to hold positions bought on dips. Some modest buying at current levels is also acceptable.

More analysis from Mikhail Makarov is on the way.

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