The S&P 500 posted narrow gains Wednesday in a bout of volatile trading after data showed that the U.S. economy contracted in the first quarter and investors' recession fears ramped up.
The broad market index advanced 0.15% to close at 5,569.06, while the Nasdaq Composite slipped 0.09% to end at 17,446.34. The Dow Jones Industrial Average added 141.74 points, or 0.35%, settling at 40,669.36.
While the S&P 500 and the Dow ultimately notched their seventh consecutive winning day, investors endured a rocky session. At their lows, the S&P 500 was down nearly 2.3%, while the Dow slid more than 780 points.
First quarter gross domestic product declined at a 0.3% rate, the Commerce Department said on Wednesday, a rapid reversal from a 2.4% increase in the fourth quarter. Some traders noted that the figures were skewed by a 41% surge in imports in the last quarter as companies looked to get ahead of President Donald Trump's tariffs. The report also showed a big slowdown in consumer spending and a decline in government expenditures amid Elon Musk's DOGE cuts.
Other data pointed to an economy that was still hanging in there. Consumer spending in the first quarter grew at its slowest quarterly pace since 2023. A separate report showed that spending was up 0.7% in March, topping the 0.5% economists expected.
In a post on Truth Social, Trump blamed a "Biden 'Overhang'" following the weak GDP numbers, telling people to "BE PATIENT!!!" and that his policies "will take a while" to take effect.
"The continual sequence of policy reversals has led to very high levels of uncertainty for businesses and investors," said Scott Helfstein, head of investment strategy at Global X ETFs. "This report should be a canary in the coal mine for the new administration, but perhaps their willingness to inflict economic pain in pursuit of the long-term goals was underestimated."
Traders managed to look past the sour data and get back into a buying mood late Wednesday, capping a remarkable comeback in stocks for April.
Trump's sweeping "reciprocal" tariff announcement on April 2 sent the stock market into a tailspin, with the S&P 500 down more than 11% at one point for the month and off by nearly 20% from its February record. A rebound ensued as Trump walked back the stiffer duties.
Ultimately, the S&P 500 ended April with a roughly 0.8% loss, while the Dow was down 3.2% for the period. It was the third straight losing month for both. The Nasdaq posted a nearly 0.9% advance for the month.
The Dow Jones Industrial Average and S&P 500 traded up on Wednesday, but still closed out the month of April with losses.
The blue-chip Dow rose 141.74 points, or 0.35%, to finish at 40,669.36, while the broad market index gained 0.15% to settle at 5,569.06. The tech-heavy Nasdaq Composite, on the other hand, fell 0.09%, closing at 17,446.34.
The artificial intelligence trade is still intact even with the threat of President Donald Trump's tariffs and global trade tensions, according to Jed Ellerbroek of Argent Capital Management.
"Over the last week and a half of earnings, I feel like what we've seen is a reaffirmation of the promise of all of these AI tools and capabilities," the portfolio manager told CNBC in an interview.
Ellerbroek pointed to the focus among companies like Meta Platforms and Microsoft on using AI to generate code. On Tuesday, Microsoft CEO Satya Nadella revealed that as much as 30% of the company's code is written by AI.
"That went from being kind of the center of investors' focus in 2023 and 2024 to now basically disregarded and not valued [or] valued much less. But the progress, the development, the impact continues to rise," he continued.
On the tariffs front, the portfolio manager believes the uncertainty surrounding the Trump administration's levies and global trade dynamics wont' be going away by the 90-day pause deadline and could instead last for years.
"It's pretty easy for a country to put on tariffs," Ellerbroek also said. "It's a lot harder to take them off."
President Donald Trump on Wednesday gave no hint that relations between the U.S. and China have thawed, telling reporters at a cabinet meeting that the Asian country is the "leading candidate for the 'chief-ripper-offer'" due to its trade polices toward the U.S.
Trump also indicated that he would again blame former president Joe Biden for second quarter economic performance after already pinning the negative GDP report for the first quarter on his predecessor.
There were only two S&P 500 sectors trading in positive territory on a down day for the broader index: Consumer staples stocks, which were higher by 0.3%, and health care, which was up 0.2%.