US stock markets rebounded from sharp declines early on Wednesday, as investors processed a range of economic data, including the first contraction of the US economy in three years. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all closed higher, despite earlier drops, marking a turbulent end to a volatile April.
S&P 500 gained 0.1%, while Nasdaq managed to recover from a significant early dip to close near the flatline. The Dow Jones Industrial Average climbed 0.3%, extending its longest winning streak of 2025.
April was a tumultuous month for stocks, influenced by fluctuations in President Trump’s tariff policies and his upbeat statements regarding negotiations with China. The Dow finished the month down over 3%, while the S&P 500 experienced smaller movements.
The market rebound came after a Chinese social media account, linked to a state-run channel, reported that the US had been reaching out to China to negotiate on tariffs, calming investor fears.
Earlier in the day, the US GDP report showed the economy contracted at an annual rate of 0.3% in the first quarter, marking the first decline in three years. The dip was largely attributed to a surge in imports, spurred by Trump’s tariff policies that unsettled businesses and led to stockpiling. Economists had expected a more modest contraction of 0.1%. In contrast, Q4 2024 had seen a 2.4% increase in GDP.
An ADP report on private payrolls also showed slower hiring in April, as businesses expressed unease in a challenging economic environment.
On the inflation front, the core Personal Consumption Expenditures (PCE) index – a key inflation measure for the Federal Reserve – showed a rise of 3.5% in the first quarter, higher than the 3.2% expected. This signals rising inflationary pressures, which could complicate the Fed’s decisions on future monetary policy.
Despite the economic concerns, major tech companies showed resilience. Microsoft reported strong earnings, driven by impressive growth in its cloud services, and Meta exceeded expectations with solid results and optimistic guidance, even amid concerns about a potential slowdown in advertising spending due to tariff uncertainty.
The stock market remains sensitive to ongoing developments in the trade war and the economic outlook, and investors will be closely watching how the Federal Reserve responds to the inflation and growth challenges moving forward.
