On Wednesday, U.S. stocks experienced a significant decline following a surprising contraction in U.S. GDP for the first quarter, highlighting the adverse initial effects of tariff threats and uncertain economic policies under President Trump. The S&P 500 decreased by 2%, the Dow Jones Industrial Average plunged nearly 600 points, and the tech-oriented Nasdaq dropped by 3%, all occurring just before major earnings announcements from key companies in the tech sector.
The U.S. GDP shrank at an annualized rate of 0.3% for the March quarter, contrary to predictions of a 0.3% increase. This downturn was driven by weakened consumer spending and increased imports, the latter aiming to circumvent impending tariffs. Additionally, both headline and core Personal Consumption Expenditures (PCE) prices rose faster than anticipated.
Compounding these economic concerns, the ADP employment report showed a sharp decline in employment growth. Stock markets faced further pressure from a wave of disappointing earnings reports, as leading corporations from various sectors withdrew their financial guidance amid prevailing economic uncertainty.
Furthermore, Caterpillar, a company often regarded as an economic indicator, saw a decline in its stock value after it revised its sales targets downward. Adding to the pessimistic mood, Microsoft and Meta (formerly Facebook) both saw their shares decrease by 2% and 2.5%, respectively, ahead of their earnings releases.
