US Stock Market Plummets Due to Q1 Negative Growth... Nasdaq Falls 2.6%

Korea Economic Daily

Summary

It was reported that the New York stock market turned to a decline as the US Q1 GDP recorded negative growth.
Morgan Stanley evaluated the poor GDP as a 'warning of stagflation' and expressed concerns about market confusion.
It was stated that the possibility of an economic recession in the US was raised due to tariff uncertainties and concerns about economic slowdown.

Economic Data Worsens Rapidly with GDP Contraction and Employment Slump

Morgan Stanley Warns of 'Stagflation'

The New York stock market turned to a decline on the 30th (local time) as data showed the US economy contracted in the first quarter, ending a six-day rally.

At 10 a.m. Eastern Standard Time, the S&P 500 index fell by 2%, and the Nasdaq Composite Index dropped by 2.6%. The Dow Jones Industrial Average fell by 1.7%.

The yield on the 10-year US Treasury fell by 2 basis points (1bp=0.01%) to 4.15%. The Bloomberg Dollar Spot Index showed little change. Bitcoin traded down 1.2% at $93,757.18.

The US Department of Commerce announced that the Gross Domestic Product (GDP) decreased by 0.3% in the first quarter. This is a sharp reversal from a 2.4% increase in the previous fourth quarter.

The record-high trade deficit in March, as companies rushed imports in anticipation of supply shocks from Trump's tariffs, and a decrease in consumer spending, which accounts for two-thirds of GDP, impacted the GDP.

The April National Employment Report from payroll company ADP also indicated an economic slowdown. The increase in private sector employment in April was only 62,000, about half of the 120,000 economists had expected.

The poor GDP data poured cold water on the surprising rebound in the stock market in April.

On April 2, the stock market plummeted with the announcement of comprehensive reciprocal tariffs by President Trump, and the S&P 500 index fell by more than 11% over the month, but stocks rebounded as the tariffs were delayed. However, concerns arose that the negative GDP growth in the first quarter would materialize fears of an economic recession.

Ellen Zentner of Morgan Stanley Asset Management said, "Today's poor GDP is a warning of stagflation." She pointed out, "Such data will not calm the market and will make the Fed's decisions more difficult."

Paul Stanley, Chief Investment Officer (CIO) of Granite Bay Asset Management, said, "Uncertainty over tariffs, DOGE's federal budget cuts, and layoffs acted as a perfect storm, causing the economy to contract in the first quarter." He added, "Negative growth is unsettling, but it is not yet certain whether the US economy will enter a recession."

Nvidia fell by 3% as AI server company Super Micro Computer announced poor performance and plunged by 16%. Tesla is trading down 6.4% at $273.

Microsoft and Meta Platforms, which announced earnings after the market closed that day, saw their stock prices fall by 2.3% and 4.2%, respectively.

Starbucks fell by 8% after announcing sales of $8.8 billion, which fell short of analysts' expectations. First Solar (FSLR) announced that tariffs would reduce this year's sales and profits, causing its stock to plunge by more than 12%.

Guest reporter Kim Jung-ah kja@hankyung.com