Dow, S&P 500, Nasdaq slip as Trump’s tariffs and inflation prey on minds

Powell said definitively on Tuesday that “there will be a regulatory framework” for stablecoins and that the central bank “supports” efforts to create one.

“Stablecoins may have a big future with consumers and businesses,” Powell said. “We can’t know that now. But it is important for the development of stablecoins and a safe and sound manner that protects consumers and savers.”

A stablecoin is defined as any cryptocurrency designed to have a relatively stable price, typically pegged to a particular commodity or currency such as the US dollar.

Powell said he “would stand by” previous comments that countries that have remained open to trade and did not erect barriers like tariffs have grown faster and had higher incomes.

“I think the standard case for free trade and all that logically still makes sense,” the Fed chair told lawmakers on Tuesday. “It didn’t work that well when we have one very large country that doesn’t really play by the rules.”

“And in any case, it’s not the Fed’s job to make or comment on tariff policy,” he continued. “That’s for elected people. And it’s not for us to comment. Ours to try to react to it.”

Powell’s remarks come after President Trump announced global 25% tariffs on steel and aluminum imports, which will take effect on March 12. Earlier 25% tariffs on Mexico and Canada are set to come next month, while 10% duties on China have already been implemented.

The central bank leader later added it ultimately remains to be seen what tariff policies will be implemented and when: “I just think it would be unwise to speculate when we really don’t know. I mean, we see proposals, but it’s so hard to say what’s going to happen.”

Powell said he couldn’t comment on whether the US economy has achieved a “soft landing,” telling lawmakers, that it was “not for me to say.”

The soft landing, defined as a scenario where economic growth slows but not to the point of a recession, has been questioned in recent weeks as some economists believe the US could face another inflation resurgence under President Trump.

Powell added, though, that the US is not in a “hard landing,” where a restrictive monetary environment forces the economy into a recession.

Fed Chair Jerome Powell said during the start of his two-day testimony on Tuesday that the playbook has been revised “in a lot of ways” following the stunning collapse of Silicon Valley Bank (SVB) in 2023.

“The supervisors didn’t follow through aggressively enough on things that they’d said,” Powell said. “If they’d done that, that could have been enough to stop it. But a lot of it was just not focusing enough directly on what was a very large amount of interest-rate risk, a large portfolio of long-term securities matched up with an unstable funding base.”

On March 9, 2023, depositors scrambled to pull out more than the $40 billion from SVB as panic spread across Twitter, as well as on other social media platforms like Slack and WhatsApp. The rush came after the bank revealed a $1.8 billion loss within its bond portfolio and plans to raise more than $2 billion in new capital.

“Somehow, we don’t expect bank runs outside of a crisis in this country,” Powell sai in his testimony. “And that’s what that was. It was a bank run. And bank runs are incredibly damaging. I think everyone learned a lot from that and is determined to do better.”

Fed Chair Jay Powell is set to begin taking questions from lawmakers in minutes, and in prepared remarks released ahead of his testimony, he reiterated his view that the central bank does not need to be in a hurry to cut interest rates.

“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said.

Referring to inflation, Powell said pricing pressures remain “somewhat elevated relative to our 2% longer-run [inflation] goal.”

On the broader economy, Powell said it is expanding at a “solid pace.”

Coca-Cola (KO) posted another strong quarter as the beverage giant’s management team discussed the potential impact of Trump’s tariff policy and recent pricing pressures.

Yahoo Finance’s Brooke DiPalma has the details:

“Commodities will be in the low-singles range overall, [with] some pressures on the agricultural — particularly juice and coffee — that are a big part of our base,” Coca-Cola CFO John Murphy said on the earnings call. “We have the usual set of levers that will deploy to cover those.”

CEO James Quincey added that President Trump’s latest aluminum tariffs will predominantly impact the US market.

“If one package suffers an increase in input costs, we continue to have other packaging offerings that will allow us to compete in the affordability space,” Quincey said.

He added that if aluminum gets more expensive, the company will put more emphasis on plastic bottles. He called it a “manageable problem.”

US stocks opened lower on Tuesday with tariff uncertainty top of mind for investors as traders also looked ahead to testimony from Federal Chair Jerome Powell on deck later this morning.

Shortly after the opening bell, Dow Jones Industrial Average (^DJI) moved around 0.3% lower, while the benchmark S&P 500 (^GSPC) also dropped roughly 0.3%. The tech-heavy Nasdaq Composite (^IXIC) pulled back around 0.5%, after a winning day on Wall Street.