Stocks tank on a double whammy of tariff warnings from the Fed and Nvidia

• Stocks fell as a pair of warnings from Nvidia and the Federal Reserve hit investor confidence.
• Nvidia's forecast of a $5.5 billion earnings hit and export restrictions led to tech-sector declines.
• Fed Chair Jerome Powell's warning of tariff-driven stagflation risk appeared to extend losses.

Stocks tanked on Wednesday as investors digested a double whammy of tariff-related warnings from Nvidia and the Federal Reserve.

Here's where indexes stood at the 4 p.m. ET close:

• S&P 500: 5,275.72, down 2.2%.
• Dow Jones Industrial Average: 39,669.39, down 1.7% (down 700 points).
• Nasdaq composite: 16,307.16, down 3.1%.

Nvidia's tariff warning

The initial decline on Wednesday started after a surprise disclosure from Nvidia. It said it expected to take a $5.5 billion hit to earnings in its first quarter.

Nvidia's massive expected charges stem from its H20 AI chips, which were developed specifically for the Chinese market. Nvidia said the US government imposed export restrictions on the chips, leaving the company holding the inventory with nowhere to sell it.

That news sparked an initial 7% decline in Nvidia shares and appeared to drag the rest of the technology sector lower. The stock extended its decline to as much as 10%, testing the $100 level.

It didn't help that ASML, a key player in the semiconductor supply chain, reported earnings that missed analyst estimates.

A tariff wake-up call from Jerome Powell

The losses intensified after Federal Reserve Chair Jerome Powell spoke at the Economic Club of Chicago.

Powell warned of a "challenging scenario" sparked by the Trump administration's tariff policies if they're fully enacted.

In this scenario, the Fed's dual-mandate goals of low unemployment and stable prices "are in tension," he said.

That could happen if the tariffs lead the economy to weaken and prices rise because companies pass tariff costs along to consumers. In other words, stagflation.

It would mean that while the Fed would be inclined to cut interest rates to help stimulate the economy, it might be handcuffed if inflation surged.

Powell acknowledged the pain that could be ahead for consumers.

"We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses," he said.