What Happened?
A number of stocks fell in the morning session after President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy.
Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension.
Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week.
Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, following stocks were impacted:
- Online Retail company Amazon (NASDAQ: AMZN) fell 3.9%. Is now the time to buy Amazon? Access our full analysis report here, it’s free.
- Online Advertising company Alphabet (NASDAQ: GOOGL) fell 3.2%. Is now the time to buy Alphabet? Access our full analysis report here, it’s free.
- Hardware & Infrastructure company Super Micro (NASDAQ: SMCI) fell 6.5%. Is now the time to buy Super Micro? Access our full analysis report here, it’s free.
Zooming In On Super Micro (SMCI)
Super Micro’s shares are extremely volatile and have had 91 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 26 days ago when the stock dropped 8.8% as markets pulled back (Nasdaq -1.5%, S&P 500 -1.2%) amid fresh concerns about trade tariffs.
The pullback followed comments from President Trump clarifying the scope of his administration's 25% tariffs on Venezuela. He noted that it would apply to any country that does business with Venezuela.
For example, 25% is on top of the already-in-place 20% tariff on China because China imports oil from Venezuela, which could translate to a 45% tariff on some Chinese goods. This announcement could significantly raise the operating costs for affected companies and institutions.
Adding to the market unease, the President announced plans for new tariffs on auto imports before the planned "reciprocal" tariffs on April 2, 2025.
There were also reports that the U.S. had added more Chinese companies to its trade blacklist, citing national security concerns. As a result, these companies would now need government approval to purchase American technology. Among those affected were tech firms that depended heavily on advanced chips made by U.S. manufacturers, raising concerns about the US chip makers' ability to maintain strong sales in the Chinese market.
Super Micro is down 1.8% since the beginning of the year, and at $29.52 per share, it is trading 69% below its 52-week high of $95.24 from May 2024. Investors who bought $1,000 worth of Super Micro’s shares 5 years ago would now be looking at an investment worth $14,068.
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