The US economy contracted in the first quarter, marking the first decline since the fourth quarter of 2022. This contraction heightened fears of recession among investors. According to the Commerce Department, the economy shrank at an annual rate of 0.3%.
The report mentioned that a 41% surge influenced the contraction in imports as companies attempted to get ahead of President Donald Trump’s tariffs. There was also a noticeable slowdown in consumer spending and a decline in government expenditures. Despite these concerning economic indicators, consumer spending saw a slight uptick.
A separate report indicated that spending rose by 0.7% in March, surpassing the 0.5% forecast by economists. President Trump attributed the weak GDP numbers to a “Biden overhang,” urging patience and suggesting that his policies would take time to take effect. Scott Helfstein, head of investment strategy at Global X ETFs, remarked that the sequence of policy reversals contributed to high levels of uncertainty for businesses and investors.
The stock market experienced mixed results on Wednesday. The Dow Jones Industrial Average rose by 141.74 points, or 0.35%, to close at 40,669.36.
S&P 500 declines for third month
The S&P 500 increased by 0.15% to settle at 5,569.06, while the Nasdaq Composite slipped slightly by 0.09%, ending at 17,446.34. Despite these gains, April marked the third consecutive month of losses for both the S&P 500 and the Dow. The S&P 500 lost approximately 0.8%, and the Dow dropped 3.2% for the month.
The Nasdaq, however, posted a small gain of nearly 0.9%. Traders managed to recover their composure later in the day and shifted back into a buying mode, driven by optimism in the stock market. Investor sentiment remained buoyed by the promise of artificial intelligence (AI).
Argentin Capital Management’s portfolio manager, Jed Ellerbroek, shared that the AI trade continued to thrive despite the tension from tariffs. Sector-wise, consumer staples and health care were the only S&P 500 sectors in positive territory, trading higher by 0.3% and 0.2%, respectively. Energy stocks did not fare well, tracking toward their most significant monthly decline since 2020 and the worst April on record.
As investors continue to digest the implications of ongoing trade policies, the future remains uncertain. The stock market remains on edge, with economic data and tariff concerns exerting significant influence.
Image Credits: Photo by Adeolu Eletu on Unsplash
