NEW YORK – In a reflection of the tumultuous nature of its April activity, Wall Street was gripped by fear on Wednesday, only to see a more subdued end as U.S. stocks mounted a comeback from substantial early losses. This erratic behavior was fueled by ongoing uncertainty surrounding President Donald Trump’s trade policies and their potential impact on the economy.
The S&P 500 climbed by 0.1%, prolonging its winning streak to seven consecutive days. Meanwhile, the Dow Jones Industrial Average increased by 141 points, or 0.3%, and the Nasdaq composite experienced a minor decline of 0.1%.
The market’s turnaround was striking, considering the S&P 500 had plummeted as much as 2.3% and the Dow had dropped 780 points earlier in the trading session. Initial stock declines were triggered by an alarming report indicating the U.S. economy may have contracted at the beginning of the year, marking a significant dip from the robust growth witnessed at the close of the previous year.
This decline was partially attributed to importers who accelerated their product entries into the U.S. to preempt price hikes imposed by tariffs, which in turn affected the country’s gross domestic product negatively.
Amidst lingering fears of “stagflation”—a scenario where the economy stalls, yet inflation remains high—economists are concerned that such a condition is challenging for the Federal Reserve to address, as interventions on one issue potentially exacerbate the other.
Despite those initial fears, the afternoon brought somewhat positive news; a report showed a slowdown in the Fed’s preferred inflation measure for March, which fell to 2.3%, edging closer to the Federal Reserve’s 2% target, down from February’s 2.7% reading. Stocks began to recover losses following this announcement. Lower inflation could provide the Fed with more flexibility to decrease interest rates to stimulate the economy.
With expectations heightened that the Fed might reduce its primary interest rate four times by year-end, it appears unlikely to begin adjustments during next week’s meeting.
Wednesday’s alarming economic indicators underscored concerns of an economy losing momentum. Data from ADP suggested that the private sector hired significantly fewer workers in April compared to economists’ forecasts, recruiting less than half the expected number. This is disheartening considering a robust job market has provided some stability to the U.S. economy.
Further data on employment from the government is anticipated on Friday, potentially providing a clearer picture.
Such developments compound worries that Trump’s trade strategies might steer the U.S. toward a recession, with tariff announcements oscillating and instilling market uncertainty.
“I’m not taking a credit or discredit for the stock market,” Trump commented Wednesday. “I’m just saying we inherited a mess.”
Historically, Trump’s tariff policies have resulted in dramatic fluctuations across financial markets, affecting stocks, bonds, and the U.S. dollar’s value, creating turbulence throughout April.
The S&P 500 briefly brushed its lowest level of the year, with alarming headlines forecasting an April akin to the era of the Great Depression. Nonetheless, April’s end saw moderated losses, closing just 0.8% down—less severe than March’s decline.
The recovery was spurred in part by promising earnings reports from large American corporations. For instance, Seagate Technology surged 11.6%, becoming one of the best performers on Wednesday.
Gains from data storage companies helped counterbalance a drop within the artificial intelligence sector, which had previously soared to potentially unsustainable levels.
Simultaneously, Super Micro Computer reported some clients had postponed purchases, prompting the server maker, crucial to AI and other computing advances, to revise down its sales and profit projections. Consequently, its stock fell by 11.5%, marking the steepest dip in the S&P 500.
Starbucks also disappointed, dropping 5.7% following a revenue and profit shortfall in the latest quarter, despite seeing its first-quarter sales growth in over a year.
Overall, the S&P 500 gained 8.23 points, reaching 5,569.06. The Dow Jones Industrial Average climbed by 141.74 points to 40,669.36, and the Nasdaq composite decreased by 14.98 points to 17,446.34, making it the third consecutive month of losses for the S&P 500.
Energy stocks endured the harshest impacts, suffering losses three times greater than other sectors within the index.
April saw Halliburton, an oil services company, fall nearly 22%, affected by the sliding crude oil prices due to fears that tariffs will hinder global economic growth.
In the bond market, investors increased their expectations for Fed rate cuts, leading to a fall in Treasury yields. The 10-year Treasury yield decreased from 4.19% to 4.17%.
Generally, lowered interest rates promote increases in stock and other asset prices. Yields had been falling gradually after an unusual increase previously in the month unsettled both Wall Street and Washington.
This uptick suggested a potential erosion of global confidence in the U.S. bond market as a traditional haven.
Internationally, stock indices saw gains across Europe following mixed results in Asian markets.