The S&P 500 is down sharply this afternoon. Losses started in the morning due to more Trump Tariff Turmoil (TTT) news. Nvidia's disclosure that the US government's new controls on its semiconductor exports to China would result in a $5.5 billion loss dragged down its shares and major indexes.
Losses extended in the afternoon after Fed Chair Jerome Powell's prepared remarks at the Economic Club of Chicago did little to assuage markets’ fears. He continued to suggest that monetary policy was in a wait-and-see mode:
"We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension ... If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close."
So barring a financial crisis, the Fed Put is on hold. The Fed won't be in a rush to save financial markets or the economy. Will it need to do so? The hard economic data have yet to suggest that but might in coming months. The longer TTT persists, the greater the chance that the data will call for Fed intervention. Here’s the latest:
(1) Retail sales. Consumers continued to spend during Q1 as retail sales jumped 1.4% in March (4.6% y/y) to a new record high, outpacing the 0.4% m/m jump in our Earned Income Proxy (chart). That was the biggest monthly gain since January 2023.
