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Investing.com -- U.S. stocks closed significantly lower on Wednesday after Nvidia (NASDAQ:NVDA) warned of substantial financial impact from new U.S. restrictions on chip exports to China and Federal Reserve Chair Jerome Powell pointed to a slowdown in U.S. economic growth, adding to market unease over the broader outlook.
The S&P 500 index fell 2.24%, moving closer to the 5100 mark. BTIG chief market technician Jonathan Krinsky said “the risk/reward was poor given the 5500-5600 upside vs. 5k-5100 downside.”
“While the SPX is now closer to 5100 than 5500, downside momentum remains in place making it tricky to bottom fish,” he added.
Even if the index stabilizes around 5000, the market is likely to remain volatile and range-bound in the coming weeks, Krinsky noted, drawing parallels to the pattern observed in 2011.
The S&P 500 has fallen by 4% in the past week, with defensive sectors like Utilities, Real Estate Investment Trusts (REITs), and Consumer Staples showing resilience by staying in positive territory.
Meanwhile, sectors such as Technology, Communication Services, and Consumer Discretionary have suffered, each dropping by 5% or more.
“Markets continue to trade defensively,” Krinsky noted.
Meanwhile, the Transportation Index (TRAN) is barely holding above multi-year support levels, with its relative performance sinking to levels not seen since 2004.
The market sentiment was partly hit after Fed Chair Jerome Powell warned that higher-than-expected tariffs could lead to increased inflation and slower economic growth.
Speaking at the Economic Club of Chicago, Powell said the Fed would wait for further data before making any decisions on interest rates.
His comments added to a selloff already underway following Nvidia’s announcement that it would incur $5.5 billion in charges. The chipmaker said the costs were tied to new U.S. export restrictions on its H20 AI chip to China, one of its major markets.
The latest tension between Washington and Beijing further rattled investors. Last Friday, China raised tariffs on U.S. imports to 125% in response to U.S. President Donald Trump’s move to hike duties on Chinese goods to 145%, escalating the ongoing trade conflict.