Wall Street storms back from early losses, concluding a month of Trump chaos
Stocks tumbled at first after news of a shrinking US economy, but bounced back following a good report on inflation
Much like its wild month of April, a scary Wednesday for Wall Street found a gentler ending as US stocks stormed back from steep early losses to continue their manic swings amid uncertainty about what US President Donald Trump’s trade war will do to the economy.
The S&P 500 rose 0.1 per cent to extend its winning streak to a seventh day. The Dow Jones Industrial Average added 141 points, or 0.3 per cent, while the Nasdaq composite edged down by 0.1 per cent.
It was a stunning reversal after the S&P 500 dropped as much as 2.3 per cent and the Dow fell 780 points in early trading. Stocks initially tumbled after a report suggested the US economy may have shrunk at the start of the year, falling well short of economists’ expectations, in a sharp turnaround from the economy’s solid growth at the end of last year.
Importers rushed to bring products into the country before tariffs could raise their prices, which helped drag on the country’s overall gross domestic product.
Such data raised the threat of a worst-case scenario called “stagflation”, one where the economy stagnates yet inflation remains high. Economists fear it because the Federal Reserve has no good tools to fix both problems at the same time. If the Fed were to try to help one problem by adjusting interest rates, it would probably make the other worse.
“Even if today’s weak GDP may have partially reflected companies trying to get ahead of tariffs, it was still a stagflation warning shot over the bow of the economy,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.