NEW YORK – A discouraging report suggesting the U.S. economy may have shrunk at the start of the year, before most of President Donald Trump’s announced tariffs could take effect, is undercutting U.S. stocks on Wednesday.
The S&P 500 was 1.4% 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%, as of 9:35 a.m. Eastern time, and sharp drops for such AI superstars as Super Micro Computer had the Nasdaq composite falling a market-leading 2%.
The weaker-than-expected report on the U.S. 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’s particularly discouraging because a relatively solid job market has been one of the linchpins keeping the U.S. 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 singlehandedly drag the U.S. economy into a recession. The president’s on-again-off-again rollout 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 U.S. dollar, that have battered investors. The S&P 500 at one point dropped nearly 20% below its all-time high set earlier this year, with some scary headlines warning of the worst April since the Great Depression.
But the uncertainty was two-sided, and hopes that Trump may relent on some of his tariffs helped the S&P 500 claw back much of its losses, and it’s set to finish April with a 2.4% loss, which would be milder than March’s.
Stronger-than-expected profit reports from big U.S. companies have also helped to support the market in the interim, and GE Healthcare rose 4.6% for one of Wednesday’s stronger gains after it joined the parade.
But Super Micro Computer helped dampen the mood after it warned that some customers delayed purchases, which caused the maker of servers used in artificial-intelligence and other computing to slash its forecast for sales and profit in the latest quarter. Its stock tumbled 18.1% for the largest loss in the S&P 500.
Other AI-related stocks also fell, including a 3.7% drop for Nvidia. Because the chip company is so huge in size, its loss made it the single heaviest weight on the S&P 500.
AI stocks have had a sharp pullback recently on worries that their stock prices had simply shot too high in prior year, when a frenzy around the industry was driving broad U.S. stock indexes to repeated records.
