Fed Chair Powell’s Tariff Talk Spooks Already-Nervous Markets

Tariffs and earnings dominated the headlines last week. Following news of a 90-day pause on reciprocal tariffs that specifically excluded China, President Trump announced exemptions for smartphones, laptops, chips, and other technologies—even those made in China. The news led to a relief rally in Apple, Dell, and other tech stocks.

Monday also brought continued positive earnings news from the financial sector, with Goldman Sachs joining JP Morgan, BlackRock, and Morgan Stanley comfortably beating first-quarter earnings estimates. Further, Goldman allocated just $287 million for credit losses, less than it had set aside in the first quarter of 2024.

Bank of America and Citigroup made clean earnings sweep for the large banks, with positive earnings reports on Tuesday. Bank of America CEO Brian Moynihan maintained the firm’s full-year guidance, saying the firm’s business clients have been performing well and that consumers have shown resilience. Meanwhile, Citigroup topped revenue and earnings estimates, with mergers and acquisitions revenue nearly doubling from a year ago.

But what had been a relatively calm, holiday-shortened trading week turned negative on Wednesday after a speech by Federal Reserve Chairman Powell and a surprising quarterly charge for Nvidia. Powell discussed how the Fed could be challenged in meeting its dual mandate to control inflation and encourage economic growth. He spoke about how he expects tariffs to lead to higher inflation and slower growth, at least in the near term, and discussed how the Fed’s 2% inflation target will likely remain out of reach in 2025.

Meanwhile, Nvidia announced a $5.5 billion charge related to its export of chips to China and other nations. The stock fell 6.9% on the news, dragging the Nasdaq index down 3%.
Eli Lilly gave its shareholders a lot to cheer for Thursday, but earnings missed from UnitedHealth Group proved a drag on the Dow Jones index. Lilly announced positive late-stage trial results from its weight-loss pill Orforglipron. The results showed the daily obesity pill lowered blood sugar and body weight for those suffering from type-2 diabetes. If approved, the treatment could alleviate supply issues that have hampered injectable weight-loss treatments. However, UnitedHealth’s earnings came up well short of expectations, and the stock slumped 25%. Management called the results “unusual and unacceptable.” UnitedHealth accounts for roughly 9% of the Dow Jones Industrials index and dragged the benchmark down 500 points. For the week, the Dow dropped 2%.

Earnings season has kicked into higher gear this week, with Tesla, Google, Boeing, AT&T, IBM, Pepsi, and others due to report first-quarter earnings. On the economic front, we’ll get fresh releases on home sales, jobless claims, and consumer sentiment. But tariffs remain a wildcard that could drive markets in either direction.