In 2025, the first-quarter decline in U.S. GDP triggered market volatility, but robust employment figures and strong tech earnings aided the rebound of U.S. stocks.

In the first quarter of 2025, the US GDP experienced an annualized contraction of 0.3%, raising market concerns about an economic slowdown and leading to stock market volatility. President Trump blamed the Biden administration's economic legacy for this. The April jobs report indicated a robust labor market, and earnings from tech giants surpassed expectations, leading US stocks to climb for nine straight days. The S&P 500 index marked the longest streak since 2004, recouping losses following the announcement of tariff policies.

First Quarter GDP Unexpectedly Contracts, Market Shows Initial Turbulence

According to data released by the U.S. Department of Commerce, the GDP growth rate for the first quarter of 2025 was an annualized -0.3%, marking a rare negative growth in recent years. Although the headline figures are concerning, analysts point out that this result was partly influenced by companies importing heavily before tariffs took effect, leading to a significant drop in the contribution of net exports to GDP. Excluding the surge in imports, actual economic activity may still maintain positive growth.

Nevertheless, on the day the GDP data was released, the three major U.S. stock indices fell during trading, with Dow Jones Industrial Average futures leading the decline. President Trump promptly posted on social media, blaming the economic weakness on the "terrible numbers" left by the Biden administration and emphasized that the new tariff policy would encourage companies to return to the U.S., bringing long-term prosperity.

April Employment Report Exceeds Expectations, Labor Market Shows Resilience

In contrast to the GDP data, the April non-farm employment report released by the U.S. Bureau of Labor Statistics showed that 177,000 new jobs were added that month, far exceeding the market expectation of 133,000, although slightly lower than the revised 185,000 in March. The unemployment rate remained at 4.2%, in line with expectations, indicating that the labor market remains resilient.

Job growth mainly came from industries such as healthcare (+51,000), transportation and warehousing (+29,000), and financial activities (+14,000). The federal government laid off 9,000 employees due to wage reduction policies in the public sector. The broad unemployment rate slightly decreased to 7.8%, and the labor force participation rate rose to 62.6%.

Although wage growth slowed, with average hourly earnings increasing by only 0.2% monthly and 3.8% annually, the lowest since mid-2024, this trend may help alleviate the Federal Reserve's pressure on inflation.

Stock Market Strongly Rebounds, S&P 500 Sets Nine-Day Winning Streak

Boosted by employment data, U.S. stocks fully rebounded on Friday. The S&P 500 index rose 1.47%, the Dow Jones Industrial Average increased by 1.39%, and the Nasdaq Composite Index climbed 1.51%. Small-cap stocks performed even more robustly, with the Russell 2000 index up 2.25%. The S&P 500 index rose for the ninth consecutive trading day, setting the longest winning streak since 2004, and fully recovered the losses incurred since April 2, when Trump announced the "reciprocal tariff" policy.

Technology stocks were the main drivers of this rebound. Microsoft shares rose 2.6%, Nvidia increased by 2.1%, and Meta has cumulatively risen nearly 9% since its earnings report. The Philadelphia Semiconductor Index surged 3.5%, and TSMC ADR also rose 3.8%.

Tech Giants' Earnings Shine, Tariff Impact Begins to Show

Despite the overall earnings season exceeding expectations, some tech companies have begun to reflect tariff pressures. Apple estimated in its earnings report that it would lose $900 million this quarter due to tariffs and is considering relocating some production lines, causing its stock to drop 3.74%. Amazon's stock fell 0.4% after releasing a conservative second-quarter forecast, citing tariffs and economic uncertainty as major risk sources.

However, Amazon's first-quarter revenue was $155.7 billion, marking a 9% year-over-year increase, slightly above market expectations. Its cloud business AWS revenue grew 17% year-over-year, achieving a record-high operating profit margin. Advertising and subscription businesses also continued to grow. Despite facing tariff and cost pressures, analysts generally maintain a positive outlook on Amazon, believing its diversified business and supply chain strategy help buffer external shocks.

Market Focuses on Federal Reserve Policy Direction

After the employment report was released, market expectations for Federal Reserve policy shifted. The CME FedWatch tool showed that the market's expectation for the first rate cut was postponed from June to July. Goldman Sachs also delayed its forecast by a month. The yield on the U.S. 2-year Treasury note rose 13 basis points to 3.83%, and the 10-year yield increased to 4.317%, reflecting the market's expectation that the Federal Reserve will keep rates unchanged in the short term.

Despite Trump's urging for the Federal Reserve to cut rates immediately, market observers believe the Federal Reserve will keep rates unchanged at next week's meeting and continue to monitor changes in inflation and employment data.

In 2025, the first-quarter decline in U.S. GDP triggered market volatility, but robust employment figures and strong tech earnings aided the rebound of U.S. stocks.

Key Updates

U.S. stock futures are down across the board: Dow is down more than 270 points, indicating market caution.

European stock markets rebound strongly: Easing of the US-China trade war boosts the market, UK stocks achieve a 15-day winning streak, Airbus's performance boosts its stock price.

All four major U.S. stock indices rose across the board on May 1: The S&P 500 achieved its longest streak of consecutive gains since 2004, boosted by employment data and trade talks.

Earnings reports from tech giants drive a rebound in US stocks, while Trump's tariff policy sparks inflation concerns.

U.S. stocks have risen for nine consecutive days: Strong non-farm payroll data and progress in U.S.-China trade talks boost the market's recovery