The U.S. stock market dropped sharply due to the triple whammy of GDP contraction, employment slowdown, and inflation pressures.

On April 30, 2025, the U.S. stock market saw significant volatility due to a 0.3% contraction in first-quarter GDP, slowing job growth, and ongoing inflationary pressures. Major indices dropped sharply in the morning session but rebounded in the afternoon after news of U.S.-China trade talks. The energy, steel, and financial sectors were the biggest losers, highlighting worries about an economic slowdown. Even though the market recovered by the end of the day, April's overall performance was poor, with the S&P 500 and Dow Jones indices falling for three straight months.

First Quarter GDP Unexpectedly Declines, Causing Market Turmoil

Data released by the U.S. Department of Commerce on Wednesday showed that the real Gross Domestic Product (GDP) for the first quarter of 2025 declined at an annualized rate of 0.3%, marking the first negative growth since 2022 and far below the market's expected 0.4% growth. This result stands in stark contrast to the 2.4% increase in the fourth quarter of 2024.

The GDP decline was primarily influenced by a surge in imports. Companies rushed to stockpile goods before a new round of tariffs by the Trump administration took effect, leading to a 41.3% spike in first-quarter imports, which negatively impacted GDP calculations. Additionally, consumer spending growth significantly slowed, dropping from 4.0% in the previous quarter to 1.8%, the slowest pace since 2023.

Weak Labor Market as ADP Employment Data Misses Expectations

The ADP employment report, released on the same day as the GDP data, further heightened market concerns. In April, the U.S. private sector added only 62,000 jobs, far below the market's expectation of 114,000, marking the lowest level since July 2024. The data indicates that companies have begun to scale back hiring in response to trade policy uncertainties and economic slowdown risks.

Inflation Data Diverges, Core PCE Remains Above Target

On the inflation front, the U.S. first-quarter core Personal Consumption Expenditures (PCE) price index increased by 3.5% annually, exceeding the market's expectation of 3.1%, showing that price pressures have not fully eased. However, the core PCE monthly growth rate for March was 0.0%, down from the previous 0.5%, suggesting that inflation may cool in the short term.

These data sets present a scenario of slowing economic growth but resilient inflation, posing challenges to market confidence.

Stock Market Experiences Volatility, Indices Recover Some Losses

Following the release of the economic data, the three major U.S. stock indices plummeted in early trading. The S&P 500 index fell by more than 2%, the Dow Jones Industrial Average dropped nearly 800 points at its lowest, and the Nasdaq index fell over 1.6%. However, market sentiment reversed in the afternoon after Chinese official media accounts released news about U.S.-China tariff negotiations, leading investors to buy the dip and push indices higher.

By the close, the Dow Jones Industrial Average rose 141.74 points (+0.35%) to 40,669.36 points; the S&P 500 index increased by 8.23 points (+0.15%) to 5,569.06 points; the Nasdaq index slightly declined by 14.98 points (-0.09%) to 17,446.34 points; and the Russell 2000 index, which focuses on small-cap stocks, fell by 0.63%.

Energy and Steel Sectors Lead Declines, Defensive Stocks Relatively Stable

In terms of industry performance, energy stocks were the weakest. The S&P 500 energy sector fell by 11.85% in April, marking the largest monthly decline since 2020, with a single-day drop of 2.27% on April 30. The Philadelphia Oil Service Index and the NYSE Arca Oil & Gas Index fell by 3.1% and 2.2%, respectively, reflecting the dual pressures of declining oil prices and an uncertain demand outlook.

Steel stocks also took a hit, with the NYSE Arca Steel Index down 2.1%. Additionally, financial, retail, and transportation stocks generally weakened.

In contrast, defensive sectors such as consumer staples (+0.73%) and healthcare (+0.85%) performed better, indicating a shift by investors towards safe-haven assets.

April Ends in the Red, Market Declines for Three Consecutive Months

Despite the late recovery, the overall performance for April was still unfavorable. The S&P 500 index fell by about 0.8% for the month, and the Dow Jones index fell by about 3.2%, both marking the third consecutive month of declines. The Nasdaq index, however, rose by about 0.9%, mainly supported by tech stock earnings.

Stock Focus: Starbucks and Super Micro Plunge

In terms of individual companies, Starbucks (SBUX) shares fell nearly 6%, closing at $80.05, due to its global same-store sales declining for the fifth consecutive quarter, indicating that its transformation strategy has not yielded significant results.

Super Micro (SMCI) plummeted by 11.5% to $31.86 per share, as the company significantly lowered its sales and profit forecasts, reflecting a potential cooling in AI-related investments.

The U.S. stock market dropped sharply due to the triple whammy of GDP contraction, employment slowdown, and inflation pressures.

Key Updates

Signs of Easing in US-China Trade Tensions: Hong Kong's Hang Seng Index Up 1.74%, Tech Stocks Lead the Gains, The Renminbi and Risk Currencies Climb Together

On May 1, 2025, the U.S. stock market ended the day higher: Technology stocks led the rally, as earnings reports from Microsoft and Meta lifted the three major indexes.

Microsoft and Meta's earnings reports beat expectations, lifting major U.S. stock indices on May 1, 2025.

On May 1, U.S. stocks rebounded strongly as earnings reports from tech giants lifted the market, with tech giants Microsoft and Meta leading the charge.

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