The U.S. economy contracted in the first quarter, intensifying investors’ recession fears.
#NewsFatafat | Wall Street ends the week strong! S&P 500 marks longest winning streak in 20 years, fueled by upbeat April payrolls report. đđşđ¸ #StockMarket #SP500 #WallStreet #JobsReport pic.twitter.com/qWpPh3419C
— ET NOW (@ETNOWlive) May 3, 2025
The Commerce Department reported on Wednesday that the first quarter’s gross domestic product shrank, a stark contrast to the 2.4% increase in the fourth quarter. Analysts pointed out that the figures were influenced by a 41% surge in imports in the last quarter as companies sought to circumvent President Donald Trump’s tariffs.
The report also noted a significant slowdown in consumer spending and a decrease in government expenditures amid budget cuts.
âThis is Bidenâs stock market, not Trumpâsâ- Wall Street Starts May Strong Despite Economic Concerns, Trump Blames Biden for Market Woes#Trump #USEconomy #WallStreet
đď¸ @AsmiParekh https://t.co/vMwssLmIVr— ET NOW (@ETNOWlive) May 2, 2025
In response to the weak GDP numbers, Trump blamed a “Biden ‘Overhang’,” urging patience as he assured that his policies would need time to take effect. Scott Helfstein of Global X ETFs remarked, “The continual sequence of policy reversals has led to very high levels of uncertainty for businesses and investors.
This report should be a canary in the coal mine for the new administration.”
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
From Apolloâs Torsten Slok:
âSince the trade war began in March, consensus expectations for [US] growth have been revised down, and consensus expectations for inflation have been revised up, see the first chart below.â#economy #markets pic.twitter.com/OTnJRl43fE— Mohamed A. El-Erian (@elerianm) May 3, 2025
Despite the adverse economic data, traders shifted back to buying by late Wednesday, completing a remarkable stock market recovery for April. President Trump’s tariff announcement on April 2 had initially caused a market tailspin, with the S&P 500 falling more than 11% at one point during the month. However, a rebound occurred as Trump moderated the tariff measures.
The S&P 500 ended April with a 0.8% loss, while the Dow dropped 3.2%.
economic contraction impacts market indices
This marked the third consecutive month of losses for both indices.
On the other hand, the Nasdaq posted a 0.9% gain for the month. Artificial intelligence continued to be a strong investment theme despite the trade tensions. Jed Ellerbroek of Argent Capital Management stated, “What we’ve seen is a reaffirmation of the promise of all of these AI tools and capabilities.” He highlighted that companies are increasingly relying on AI for various tasks, including code generation, which Microsoft CEO Satya Nadella mentioned.
However, Ellerbroek cautioned that the uncertainty surrounding tariffs could persist for years. President Trump remained resolute in his stance toward China, labeling the country as the “leading candidate for the ‘chief-ripper-offer'” due to its trade policies. He also indicated optimism for the second quarter’s economic performance, attributing the first quarter’s negative GDP report to the previous administration.
On a sectoral level, only two S&P 500 sectors, consumer staples and health care, ended in positive territory. Energy stocks had a particularly challenging month, tracking for their worst April on record with a 14.5% decline. Among individual stocks, Palantir and Netflix were standout performers in April.
Palantir gained more than 36%, marking its best month since November 2024, while Netflix was up over 20%.
