Stan Choe, AP Business Writer
NEW YORK (AP) — US stocks began on sound Wednesday after reports suggested that the US economy may have contracted at the start of the year. But amid uncertainty about what President Donald Trump’s trade war would do for the economy, the big losses eased as the morning went on to smack Wall Street with its latest sharp swing.
The S&P 500 was on track to beat the six-day winning streak, down 1% in the noon trade. The Dow Jones industrial average was 271 points (0.7%) as of 11:30am Eastern time, while the Nasdaq Composite was 1.4% lower.
They were on track early in the morning for a much worse loss when the S&P 500 fell by 2.3% and the Dow dropped 780 points. They sank after reports on the US economy were far from the expectations of economists. This is a sudden shift from the solid pace of growth at the end of last year.
Importers rushed to bring products into the country before customs duty raised prices.
Such data poses the worst-case scenario threat called “STAGFLATION.” The Federal Reserve doesn’t have the right tools to fix both issues at the same time, so economists fear it. If the Fed tries to adjust interest rates to help one, it could exacerbate the other issues.
According to Ellen Zentner, a leading economic strategist at Morgan Stanley Wealth Management, “Even if today’s weak GDP could partially reflect companies seeking to preempt tariffs, it was still a warning shot of stagflation over the bow of the economy.”
However, financial markets got some better news in the morning when they said inflation measures the Fed prefers to use slowed down in March. Inflation slowed from reading 2.7% in February to 2.3% close to the Fed’s 2% target. Inventory halved the losses following the siege report.
Still, much of Wednesday’s economic data raised concerns about the weakening of the economy. Another job market report from ADP suggests that non-government employers may have hired far fewer workers than the expected economists in April.
The relatively solid job market is discouraged as it is one of the lynch pins that has stabilized the US economy. A more comprehensive report on the overall job market from the US government arrives Friday.
Wednesday’s report adds to concerns that Trump’s trade war could drag the US economy into a recession. The repeated development of the president’s tariffs has already created deep uncertainty about what is coming, which in itself could cause damage.
Uncertainty has created a historic shaking in financial markets, from stocks to bonds to the value of the US dollar. The S&P 500 at one point dropped its highest ever set by nearly 20% earlier this year.
But the uncertainty is both sides, and I hope that Trump will be tolerant of some of his tariffs and reach trade deals with other countries will help the S&P 500 claws regain much of that loss. It was set to close in April with a loss of less than 2%, which is milder than in March, 10.4% below the record.
Stronger profit reports from large US companies helped support the market, with Seagate technology rising 9.6% in one of its biggest profits on Wednesday after data storage manufacturers joined the parade.
However, the possibility of hampering trends within the artificial intelligence industry helped offset the interests of storage manufacturers. AI stocks have come back sharply with concern that their prices are too high as the frenzy around the industry repeatedly recurs with the widespread US stock index.
Super Micro Computer warned that manufacturers of servers used in AI and other computing have reduced sales and profit forecasts as some customers delayed their purchases in recent quarters. Its inventory fell 15.3% against the biggest losses on the S&P 500.
Other AI-related strains also fell, including a 2.5% drop in Nvidia. The chip company’s size is so large that its loss was the heaviest weight on the S&P 500.
Starbucks sank 7% after the coffee chain failed to reach analyst forecasts for revenue and profits for the most recent quarter. Starbucks recorded its first quarter sales increase in over a year, but admitted that its shifting efforts were not perfect.
In the bond market, the Treasury yields were relatively stable. The 2010 Treasury yield eased to 4.17% from 4.19% on Tuesday.
Yet yields have been sinking for the majority since earlier this month, that unsettling and unusual eruption rattled both Wall Street and the US government. That rise suggested that investors around the world may have lost faith in the reputation of the US bond market as a safe place to park their cash.
In overseas stock markets, indexes were mixed across Europe and Asia.
AP business writers Matt Ott and Elaine Kurtenbach contributed.
Original issue: April 30, 2025, 7:39am EDT
