A discouraging report suggesting the US economy may have shrunk at the start of the year, before most of President Donald Trump’s announced tariffs could take effect, is undercutting US stocks on Wednesday.
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The S&P 500 was 1.4 per cent lower in early trading and on track to break a six-day winning streak. The Dow Jones Industrial Average was down 396 points, or 1 per cent, as of 9.35am Eastern time, and sharp drops for such AI superstars as Super Micro Computer had the Nasdaq composite falling a market-leading 2 per cent.
The weaker-than-expected report on the US economy surprised financial markets because economists were expecting to see modest growth, particularly after the economy closed last year running at a solid pace. But importers rushed to bring products into the country before tariffs could raise their prices, which helped drag on the country’s overall gross domestic product.
A separate report on the job market from ADP added to the worries after it suggested employers outside the government may have hired far fewer workers in April than economists expected, less than half. It is particularly discouraging because a relatively solid job market has been one of the linchpins keeping the US economy stable. A more comprehensive report on the overall job market will arrive on Friday.
Wednesday’s worse-than-expected reports compound worries that Trump’s trade war may single-handedly drag the US economy into a recession. The president’s on-again-off-again roll-out of tariffs has already created deep uncertainty about what’s to come, which causes damage on its own.
The uncertainty caused historic swings in financial markets, from stocks to bonds to the value of the US dollar, that have battered investors. The S&P 500 at one point dropped nearly 20 per cent below its all-time high set earlier this year, with some scary headlines warning of the worst April since the Great Depression.
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