Stocks sank sharply in morning trade after new government data showed the U.S. economy shrank in the first three months of the year.
The S&P 500 dropped 93 points, or 1.7%, to 5,468; the Dow Jones Industrial Average fell 604 points, or 1.5%; and the tech-heavy Nasdaq Composite shed 2.4%.
The Commerce Department said in a report on Wednesday that the nation’s gross domestic product — the total value of products and services — shrank at a 0.3% annual rate, down from growth of 2.4% in the final three months of 2024.
“Equity traders will not be happy with the negative GDP headline,” Carl Weinberg, chief economist at High Frequency Economics, said in a research note. “Contracting GDP is not good for company profits, whatever the cause.”
The latest GDP readout was also lower than forecast of 0.8% growth from economists polled by FactSet. Bret Kenwell, an investment analyst eToro, said in an email to CBS MoneyWatch that it was the lowest GDP reading since the first quarter of 2022.
Still, the report may not fully reflect the state of economic growth, economists cautioned. Part of what dragged the GDP number down, they said, was a surge in imports as businesses sought to get ahead of tariffs.
The GDP rate could be “subject to notable revisions,” Kenwell noted, given the Trump administration’s stop-and-go trade policies towards trading partners Canada and Mexico.
Tariffs weigh on markets
Wall Street analysts have warned that the Trump administration’s trade, immigration and fiscal policies could dent U.S. economic growth, with some economists raising the odds of a recession.
Changes in trade policy have heightened market volatility in recent weeks, with analysts telling CBS MoneyWatch that stocks are likely to remain choppy until investors get more clarity on tariffs.
Mr. Trump blamed stock market performance on President Biden in a Truth Social post on Wednesday and said a boom from the tariffs was coming.
“This is Biden’s Stock Market, not Trump’s. I didn’t take over until January 20th. Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers,” he wrote. “Our Country will boom, but we have to get rid of the Biden ‘Overhang.’ This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers…”
Investors will get another important economic snapshot on Friday, when the Labor Department releases data on April job growth. The April jobs report is expected to show that employers added 135,000 jobs, FactSet data shows, with than March’s tally of 228,000.
A report from ADP on Wednesday suggests hiring is slowing down, with private employers adding 62,000 jobs in April, less than half of the number of jobs added in March.
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