00:00 Speaker A
Well, US stocks sell off with tariff fears returning to Wall Street, Fed chair Powell warning of challenging impacts to come from the uncertainty around Trump’s trade policy. Yahoo Finance’s very own Josh Shafer joins us now with the trading day takeaways. Josh.
00:16 Josh
Hey Josh, yeah, so we’re going to start with what chair Powell had to say and take a look just simply at how markets reacted. So we had Fed chair J. Powell talking in Chicago at 1:30 this afternoon. I’m going to flip over to the S&P 500 and we’ll just look at the intraday action because that’s really where we saw a lot of the selling, Josh. And really, the selling started happening as Powell sort of detailed what has been going on with the understanding these tariffs, right? So he sort of said the same thing that economists have been telling us for weeks now. Probably higher inflation, probably slower growth. But sort of the key part of that is, he’s not sure the Central Bank can come in and help markets right now, right? I think he sort of he was asked specifically about that quote unquote Fed put. Could the Fed come in at some point if stocks are selling off to a certain extent? Powell said, no. He sort of explained this is how markets are supposed to function. But I think that really sort of drove the sell-off that we saw overall because I think investors are still hoping that at some point whether it be the Fed or President Trump, someone’s going to come and help with what’s going on, but it doesn’t seem like that’s coming, Josh.
01:54 Speaker A
Yeah, I it’s interesting if you have Fed chair Powell saying, “Yes, I think, you know, Trump tariffs could definitely generate higher inflation and slower growth.” I I think you’re right, Josh. I think markets just heard, “Well, if I have a Fed head publicly talking about higher inflation, then if I was hoping for any kind of rate cut, at least in near term, they were disappointed by that. You saw the reaction.
02:36 Josh
Yeah. And and it was interesting too, so uh Renaissance backer Neil Dutta pointed out that with Powell basically pushing rate cuts down the line, he started saying that’s raising the odds of recession. And I want to pull up this chart, Josh. So what I was looking at here is the max drawdown in the S&P 500 in years that we are in recession, the US economy is in recession. Those are highlighted in green. What you notice here, those bars go down pretty far, don’t they? Right? So those bars are usually more than 20%. Notice our S&P 500 drawdown this year has only been 19%. So something I’ve been talking to strategists about this week is essentially perhaps the biggest fear right now in markets is if we are indeed going into recession as some economists have called for, maybe we have more selling to do in the stock market. And I know you were talking to Michael Antonelli earlier in the hour. He sort of said the similar thing, right? Maybe it’s not all about tariffs right now. It’s about what tariffs mean for the economic data. And if the data actually gets worse, perhaps the next move in the market is actually lower than we’ve already seen.
04:13 Speaker A
Yeah, it was actually when Powell talked about the economy and the labor market. I mean, he seemed to paint a picture that was broadly solid still. But you’re right, I know there’s plenty of smart strategists and economists who do think that’s that’s too optimistic. We’ll see.
04:35 Josh
And then it was interesting, Josh, cuz we had sort of the Fed sell off, right? But that was really just exacerbating an issue that we already had to start the day, right? So we had news overnight in Nvidia coming out and saying that these new export provisions from the US government on their exports to China might cost the company in several billions of dollars and expenses, AMD saying it might cost them $800 million. But look at what happened to those stocks today, right? Nvidia actually recovered a little bit into the close. This stock was down as much as 10%. But I think what you’re seeing when you tie these two narratives together is just uncertainty from the administration right now, whether it be directly tariff related or other sort of policies, continue to weigh on markets, individual stocks, and overall stocks as a whole, right?
05:37 Speaker A
Yeah, and investors try and kind of also pick their spots. I mean, we had Sylvia Jablonski on the show today. She she was actually seeing opportunities. She was picking up some chip names. We had Dan Newman also. Dan was interesting cuz I asked him, “Well, if you were a chip investor, where would you be looking?” And and Dan, he gave kind of this sort of bifurcated view. He he would be looking those chip names that have data center exposure, enterprise. I asked him, “Would you also want chip names that have exposure to consumers, though, smartphones and PCs and autos?” There, he would still stay clear.
06:31 Josh
Yeah. I was talking to a strategist the other day, Josh, who sort of highlighted when you look at a board like this and you’re thinking as a long-term investor over the next 5 to 10 years, what businesses are services that are still going to be here and be a part of our culture in 5 to 10 years, right? That’s sort of the key question that he feels like people should be asking right now is, it’s, all right, there’s tariff exposure right now, but does that mean that we’re none of us are going to use Instagram or Facebook in the next five years and that business is fully going away or do you believe in that business? And I thought that was pretty sound advice to be thinking about right now as you sort of look at what’s on sale and what’s actually maybe worth buying within the market.
07:22 Speaker A
Yeah. Another takeaway for me is we both talked to a lot of strategists.
07:27 Josh
Oh, yeah.
07:28 Speaker A
Yeah, for sure.
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