Markets mixed as Fed cut looms, Nvidia slides on China AI chip purchase ban
TOI World Desk | Sep 17, 2025, 21:37 IST
Wall Street finished mixed as investors awaited the Federal Reserve’s upcoming decision on interest rate cuts. The Dow Jones was supported by financial stocks, while the Nasdaq lagged behind amid weakness in technology shares. Nvidia tumbled after reports that Chinese regulators instructed tech companies to stop buying its AI chips, heightening trade and regulatory concerns. The uncertainty ahead of the Fed’s move kept markets cautious, with investors balancing optimism about easing rates against ongoing geopolitical and tech sector pressures.
Wall Street wobbled on Tuesday as traders waited for the Federal Reserve's expected interest rate cut later this week, with tech shares struggling after news that Chinese regulators instructed local firms to halt purchases of high-end chips from Nvidia.
The Dow Jones Industrial Average inched up, boosted by financials and energy stocks, while the Nasdaq Composite, which is weighted heavily with technology shares, trailed, weighed down by a downturn in semiconductor and megacap tech stocks. The S&P 500 traded close to even, mirroring a nervous tone in markets as investors positioned themselves in anticipation of a critical Fed announcement.
Nvidia, one of Wall Street's largest winners in the last two years, plummeted over 4% after news that Beijing ordered Chinese companies to suspend the buying of its top artificial intelligence chips. The action reflects growing technology tensions between Beijing and Washington, especially over semiconductors underpinning AI development.
Investors worry that tighter restrictions on Nvidia's capacity to sell into China — traditionally one of its largest markets — could dampen future revenue growth. The decline in the stock also weighed on other chipmakers, with Advanced Micro Devices and Broadcom falling in sympathy.
This is a reminder that geopolitics are still a risk factor for U.S. technology companies, particularly those with high exposure to China," said Quincy Krosby, chief global strategist at LPL Financial.
Markets are now intently looking to the Fed, which is likely to lower its benchmark rate by a quarter percentage point at its September meeting — the central bank's first cut of 2025. The traders will also be monitoring the revised economic projections, the so-called "dot plot," to see how many additional cuts officials expect through the end of the year.
Although inflation has eased from the highs of a year ago, it still hovers above the Fed's 2% goal, putting officials in a quandary between supporting growth and choking back price pressures.
"Investors want to see that the Fed will ease but not risk sparking inflation again," said Mona Mahajan, senior investment strategist at Edward Jones. "That's why the market is holding its breath until we actually hear from Chair Jerome Powell."
Aside from technology, bank stocks helped power the Dow as banks could gain from better loan demand and a less volatile yield curve environment. JPMorgan Chase and Bank of America shares each rose more than 1%.
Energy stocks also increased with increased crude prices, with Exxon Mobil and Chevron notching small gains. Defensive areas, including consumer staples and utilities, resisted the slide as investors bet against future volatility in the week.
However, growth-sensitive areas such as consumer discretionary and communications services lagged behind. Tesla fell over 2%, while Alphabet and Meta Platforms closed down as investors reduced risk in big tech.
Near-term market direction will depend on how the Fed positions its policy trajectory, according to analysts. A dovish tone, indicating a string of cuts to come, might trigger a relief rally in rate-sensitive areas such as housing and small-cap stocks. However, a more cautious stance, with policymakers highlighting persistent inflation risks, might keep stocks stuck in neutral.
“Earnings growth has been strong this year, but valuations remain elevated,” said Art Hogan, chief market strategist at B. Riley Wealth. “The Fed’s message could determine whether this market has room to run or whether we’re in for a period of consolidation.”
For now, investors remain cautious, balancing optimism about a potential easing cycle with concern over global trade tensions and uneven economic data.
The Dow Jones Industrial Average inched up, boosted by financials and energy stocks, while the Nasdaq Composite, which is weighted heavily with technology shares, trailed, weighed down by a downturn in semiconductor and megacap tech stocks. The S&P 500 traded close to even, mirroring a nervous tone in markets as investors positioned themselves in anticipation of a critical Fed announcement.
Nvidia targeted by China action
Nvidia, one of Wall Street's largest winners in the last two years, plummeted over 4% after news that Beijing ordered Chinese companies to suspend the buying of its top artificial intelligence chips. The action reflects growing technology tensions between Beijing and Washington, especially over semiconductors underpinning AI development.
Investors worry that tighter restrictions on Nvidia's capacity to sell into China — traditionally one of its largest markets — could dampen future revenue growth. The decline in the stock also weighed on other chipmakers, with Advanced Micro Devices and Broadcom falling in sympathy.
This is a reminder that geopolitics are still a risk factor for U.S. technology companies, particularly those with high exposure to China," said Quincy Krosby, chief global strategist at LPL Financial.
Fed rate decision in focus
Markets are now intently looking to the Fed, which is likely to lower its benchmark rate by a quarter percentage point at its September meeting — the central bank's first cut of 2025. The traders will also be monitoring the revised economic projections, the so-called "dot plot," to see how many additional cuts officials expect through the end of the year.
Although inflation has eased from the highs of a year ago, it still hovers above the Fed's 2% goal, putting officials in a quandary between supporting growth and choking back price pressures.
"Investors want to see that the Fed will ease but not risk sparking inflation again," said Mona Mahajan, senior investment strategist at Edward Jones. "That's why the market is holding its breath until we actually hear from Chair Jerome Powell."
Diverging sectors
Aside from technology, bank stocks helped power the Dow as banks could gain from better loan demand and a less volatile yield curve environment. JPMorgan Chase and Bank of America shares each rose more than 1%.
Energy stocks also increased with increased crude prices, with Exxon Mobil and Chevron notching small gains. Defensive areas, including consumer staples and utilities, resisted the slide as investors bet against future volatility in the week.
However, growth-sensitive areas such as consumer discretionary and communications services lagged behind. Tesla fell over 2%, while Alphabet and Meta Platforms closed down as investors reduced risk in big tech.
Market outlook
Near-term market direction will depend on how the Fed positions its policy trajectory, according to analysts. A dovish tone, indicating a string of cuts to come, might trigger a relief rally in rate-sensitive areas such as housing and small-cap stocks. However, a more cautious stance, with policymakers highlighting persistent inflation risks, might keep stocks stuck in neutral.
“Earnings growth has been strong this year, but valuations remain elevated,” said Art Hogan, chief market strategist at B. Riley Wealth. “The Fed’s message could determine whether this market has room to run or whether we’re in for a period of consolidation.”
For now, investors remain cautious, balancing optimism about a potential easing cycle with concern over global trade tensions and uneven economic data.