The U.S. economy contracted in the first quarter, intensifying investors’ recession fears and causing significant market swings on Wednesday.
The S&P 500 and Dow Jones Industrial Average both endured substantial losses at their intraday lows but managed to advance by the close of trading. The Commerce Department reported that the first quarter gross domestic product (GDP) had declined by 1.4%, a sharp reversal from the 2.4% increase recorded in the fourth quarter.
The S&P 500 has recovered all of its post-'Liberation Day' losses.
It ended up 2.92% this week and 7.65% over the last two weeks, the largest two-week gain since October 2022. pic.twitter.com/suAggnfeoH
— Nick Timiraos (@NickTimiraos) May 2, 2025
This decline was partly attributed to a 41% surge in imports, as companies moved to preempt President Donald Trump’s forthcoming tariffs. Former President Trump weighed in on the economic situation, attributing the weak GDP numbers to a “Biden ‘Overhang’,” while urging patience as his policies purportedly need time to take effect. Scott Helfstein of Global X ETFs noted the economic uncertainty caused by frequent policy reversals.
Despite the initial shock of the economic data, investor sentiment improved later in the day.
Per the @WSJ : “The S&P 500 just wrapped up a nine-day streak of gains—its longest since 2004—rising around 10% to erase the sharp losses that followed the president’s unveiling of the tariffs last month. It has now declined just 3.3% for the year.”#economy #markets pic.twitter.com/evTVOsisi2
— Mohamed A. El-Erian (@elerianm) May 4, 2025
The S&P 500 finished April with a 0.8% loss, and the Dow was down 3.2%, marking three consecutive months of losses for both indices.
gdp and market turbulence
The Nasdaq ended the month with a nearly 0.9% gain. Consumer staples and health care stocks were the only sectors trading in positive territory amid the broader market downturn, underscoring heightened economic anxieties. Technological advancements and investments in artificial intelligence (AI) remained promising despite market fluctuations.
President Trump criticized China for its trade policies during a cabinet meeting and hinted at his concerns over upcoming economic reports. In individual stock movements, Etsy shares fell amid uncertainty surrounding tariffs, while Seagate surged following strong quarterly earnings. Energy stocks faced a particularly tough April, with the sector tracking its worst monthly performance since 2020.
By contrast, companies like Palantir and Netflix were among the top performers for the month. April 2025 witnessed significant volatility in the stock market, driven by economic data and policy developments. Despite an overall challenging month, sectors like consumer staples and health care offered safe havens, and technological advancements continued to hold promise for future growth.
Image Credits: Photo by Kindel Media on Pexels
