Stocks Slide on Gloomy GDP Data

Stocks fell on Wednesday after data showing an economic contraction in the first quarter stoked investor fears of a slowdown. It’s an early sign that President Trump’s dramatic overhaul of US trade policy is weighing on activity. There is a general consensus among analysts that Trump’s new tariffs will dent economic growth and stoke inflation, at least in the short term.

The Morningstar US Market Index fell more than 2.2% after Wednesday’s open before paring some losses to trade 1.7% lower.

Stocks have risen 10% since bottoming out on April 8, but they remain 2.7% lower than they were ahead of Trump’s April 2 tariff announcement.

Tariffs Weigh on GDP

Preliminary data released Wednesday by the US Bureau of Economic Analysis showed that economic growth contracted at a rate of 0.3% in the first quarter, compared with 2.4% growth in the fourth quarter of 2024. That contraction was largely driven by a spike in imports, as US firms stocked up on inventory in advance of the sweeping new tariffs.

“The surge in imports puts an asterisk on today’s negative first quarter GDP release but also shows how dramatically government policy expectations can drive real-world business decisions,“ says Peter Graf, chief investment officer at Nikko Asset Management Americas. “Companies got ahead of possible tariffs by building inventories just as they are now likely getting ahead of a possible policy-driven recession by reducing hiring and investment.”

Separate data released Wednesday showed that, as measured by the Personal Consumption Expenditures Price Index, inflation rose a stronger-than-expected 2.6% after factoring out volatile food and energy prices.