Stocks pared earlier losses and the broader market rose on Wednesday even as recession fears were boosted by the U.S. economy contracting in the first quarter -- adding to the noise of economic uncertainty that began with President Donald Trump's trade policies. The Dow Jones Industrial Average climbed over 100 points after falling more than 700 points earlier in the session, while the S&P 500 Index added about 2% and the Nasdaq Composite ticked below the flatline.
Here's how the market settled on Wednesday:
S&P 500 Index (NYSE: SPY): +0.15% or +8.23 points to 5,569.06
Dow Jones Industrial Average (NYSE: DIA): +0.35% or +141.74 points to 40,669.36
Nasdaq Composite Index (NASDAQ: QQQ): -0.09% or -14.98 points to 17,446.34
Investor Sentiment dropped on Wednesday after the Commerce Department reported first-quarter Gross Domestic Product (GDP) contracted at a 0.3% rate, reversing the fourth-quarter's 2.4% increase. This was the first quarter of negative growth since the first quarter of 2022.
Imports notably soared 41% last quarter, driven by a 50.9% increase in goods and subtracting from GDP, as many companies looked to increase inventories ahead of Trump's tariffs.
The negative report comes as Wall Street attempted a big turnaround from the lows of early April, when Trump announced 10% tariffs on all U.S. trade partners as well as "reciprocal" tariffs on other key trading partners. Trump then suspended most levies for 90-days on April 9, which boosted outlooks until more uncertainty set in as the U.S. raised its effective tariff rate on most Chinese imports to 145% and Beijing issued its own 125% duty in American imports.
The S&P 500 was down more than 11% at one point in April and off nearly 20% from its February record after the tariffs were initially announced. However, the broader market index lost just 0.8% in April as the three-month tariff pause helped lift most sectors throughout the month. The Dow is also down 3.2% for the period, marking its third straight month of losses, while the tech-heavy Nasdaq advanced nearly 0.9%.
Trump took to his social media platfrom Truth Social following the report's release, stating that this is "Biden's Stock Market."
"Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers," Trump wrote. "Our Country will boom, but we have to get rid of the Biden 'Overhang.' This will take a while, has NOTHING TO DO WITH TARIFFS, only that he left us with bad numbers, but when the boom begins, it will be like no other. BE PATIENT!!!"
Consumer Spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.7% in March, according to the Commerce Department's report, adding to February's upwardly revised gain of 0.5%. Meanwhile, the month's Personal Consumption Expenditures Price Index (PCE) reading rose 2.3% year-over-year, the Bureau of Labor Statistics reported Wednesday. Excluding more volatile foods and energy costs, core PCE -- the Federal Reserve's preferred inflation gauge -- rose less than 0.1% month-to-month and 2.6% annually in March.
The central bank, which is set to meet next week to update its monetary policy, appears to be reaching the "challenging scenario," Fed Chair Jerome Powell warned of in remarks earlier this month where its dual mandates of stabiliting prices and maintaining a high employment rate are unsustainable due to Trump's tariff pressures on the broader economy.
Looking at the labor market, Private Payrolls posted their slowest gain in nearly a year in April as business outlooks grew cloudy, ADP reported Wednesday. Headline additions rose by just 62,000 for the month, marking a deceleration from March's downwardly revised gain of 147,000.
"Unease is the word of the day. Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data," said Nela Richardson, chief economist at ADP, in a statement. "It can be difficult to make hiring decisions in such an environment."
ADP's estimate often serves as a preview of the Labor Department's "official" jobs report. Economists surveyed by Dow Jones expect Friday's report to show nonfarm private payroll growth of 133,000 with the unemployment rate remaining unchanged at 4.2%.
On the Earnings Front:
Starbucks (NASDAQ: SBUX) reported disappointing earnings late Tuesday as same-store sales declined for another quarter as the coffee chain works to turnaround its business strategy. The company's same-store sales in the U.S. fell 2% in its second-quarter, while China's (its second largest market) sales were flat. Global same-store sales also fell 1% during the quarter, impacted by a 2% decline in transactions.
"Our financial results don't yet reflect our progress, but we have real momentum with our 'Back to Starbucks' plan," CEO Brian Niccol said in a video posted on the company's website. "We're testing and learning at speed and we're seeing changes in our coffeehouses."
Snap (NYSE: SNAP) shares sharply fell on Wednesday after the social media company pulled its second-quarter forecast as it faces "headwinds," at the start of the quarter as macroeconomic conditions impact the advertising industry. Despite the disappointing outlook, the company saw ad revenues grew 9% year-over-year to $1.21 billion during its first-quarter and reached 900 million monthly active users, an increase from the 850 million reported in August.
Looking Ahead:
Investor attention will turn to earnings reports from big tech companies including Microsoft (NASDAQ: MSFT), Meta Platforms (NASDAQ: META) on Thursday, alongside reports from other market leaders like McDonald's (NYSE: MCD), Mastercard (NYSE: MA) and Eli Lilly (NYSE: LLY).