Wall Street tumbles as economy contracts for first time since 2022

Wall Street's main indexes dropped on Wednesday after data showed the economy contracted for the first time in three years in the first quarter, deepening concerns around the impact of US tariffs and the global trade war.

The Commerce Department's advance gross domestic product report took center stage on a data-packed day, showing a 0.3% contraction for the first quarter, compared with expectations for 0.3% growth according to economists polled by Reuters.

Private payrolls growth also slowed more than expected in April, while the personal consumption expenditure index - the Federal Reserve's preferred inflation gauge - was broadly in line with expectations.

US consumer spending grew 1.8% after a robust 4% jump in the fourth quarter.

Wednesday's reports join a series of data releases over the month that have pointed to an increasingly uncertain outlook for the USeconomy, as the fallout from the Trump administration's steep tariffs and erratic trade policy take effect.

Traders are now pricing in a full percentage point interest rate cut from the Fed by the end of the year.

"The Fed has been very data dependent and they're going to
want to see some of this hard data like GDP and some of the
labor market data really show signs of weakness," said Charlie
Ripley, senior investment strategist at Allianz Investment
Management.

"We are starting to see a little bit of that, which is
really why you're seeing the market reacting the way it is
today."

At 11:46 a.m. ET, the Dow Jones Industrial Average
fell 219.69 points, or 0.54%, to 40,307.93, the SP 500
lost 47.41 points, or 0.85%, to 5,513.42 and the Nasdaq
Composite lost 212.90 points, or 1.23%, to 17,248.42.

Declines were broad-based, with most SP 500 sectors in the
red and the energy index leading losses with a 3% drop.
The economically sensitive small-cap Russell 2000 fell
1.3%.

Meanwhile, "Magnificent Seven" members Meta Platforms
and Microsoft fell 2.6% and 0.9% ahead of
their results, due after markets close, that investors are
watching closely for clarity on the outlook for the tech sector
and AI-focused investments.

Fanning concerns about a pullback in investments into AI,
Super Micro Computer cut its third-quarter forecasts
due to delays in customer spending, while Snapchat parent Snap
said it would not provide a second-quarter financial
forecast.

Their shares fell nearly 15% each.

Caterpillar slipped 0.7%, reversing premarket gains
booked after its quarterly results.

Wall Street's indexes recouped some ground this month after
a sharp slump following the April 2 "Liberation Day" tariff
announcements, but are still set for monthly declines.

The SP 500 is poised to snap its best winning streak since
November if losses hold through close.

Wednesday also marks 100 days since Trump took office.
Erratic changes in trade policies and uncertainty have roiled
markets over that period, offsetting initial optimism over the
administration's business-friendly policies.

Declining issues outnumbered advancers by a 3.18-to-1 ratio
on the NYSE and by a 2.57-to-1 ratio on the Nasdaq.

The SP 500 posted 5 new 52-week highs and 3 new lows while
the Nasdaq Composite recorded 21 new highs and 74 new lows.