Wall Street ended lower on Wednesday, as fears of recession returned following the surprise drop in US GDP during the first quarter.
The renewed threats of tariffs by President Donald Trump and the uncertainty surrounding trade policies further hampered the economy, sapping the impressive rally in the equity markets that occurred during April.
Investors digested disappointing economic news and consequently, S&P 500 dropped 0.7%. Nasdaq Composite fell 1%. Dow Jones Industrial Average lost 159 points or 0.4%.
The cautious market mood was heightened by a sharp drop in consumer spending, and the rise of geopolitical risk.
US Economy shrinks due to slowing consumer spending
The Commerce Department reports that the gross domestic product (GDP), which grew by 2.4% in the preceding quarter, declined in Q1 of 2025 at an annualized 0.3% rate.
The overall report revealed more serious concerns. While some analysts blamed the decline on a spike in imports that occurred late last year – a 41 percent increase as businesses rushed to stock up before tariffs were introduced – the individual reports exposed deeper issues.
The US consumer spending sector, which is the foundation of the US economic system, has posted the slowest growth in the last quarter since 2023.
The government’s spending has also fallen, due to the recent budget cuts by Elon Musk and his DOGE.
Consumer spending in March surprised on the upside, with an increase of 0.7%, compared to economists’ expectations of 0.5%. This is a small sign of strength.
The April recovery stalls due to tariff turmoil
This April, the disappointing US GDP report halted a rapid rise in US stock prices.
S&P 500 had almost recovered its entire loss following Trump’s announcement of tariffs on April 2.
Trump’s suggestion that negotiations with India had progressed, and Commerce Secretary Howard Lutnick hinted towards a larger trade agreement on the horizon, lifted expectations.
The data released on Wednesday has re-ignited concerns that economic harm may be already underway.
Trump blamed a “Biden Overhang” on Truth Social. He urged Americans to be “PATIENT!! Trump said that it would take “a long time” for his policies to produce results.
Stocks in the solar and semiconductor industries are hit hard
First Solar, a solar technology company, saw its share price plummet 9% following CEO Mark Widmar’s warning that Trump tariffs will create “significant economic pressure.”
In response, the company revised its forecast for the full year downward. GE HealthCare revised their guidance downwards, citing the same tariff pressures.
Nvidia’s share price dropped over 1% in tech following the nearly 14% decline of server manufacturer Super Micro Computer. The company released weak Q3 preliminary results.
Concerns about hardware demand led to a sell-off of other AI stocks.
As recession fears increase, defensive sectors are thriving
Only two S&P 500 sectors managed to remain in green despite the sell-off: Consumer staples and Health Care.
The macroeconomic climate has caused investors to turn away from riskier names. Health care and staples are up by 0.2% each, indicating caution.
Wall Street is bracing for increased volatility as the US-China relations remain tense – Trump called China “the chief-ripper offer” in a cabinet-level meeting – and the recession risk continues to build.
The post US Markets Today: Wall Street tumbles amid recession fears due to Trump’s tariffs may change as new developments unfold.
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