The US economy experienced an unexpected contraction of 0.3 percent in the January-March quarter, ending a streak of growth from the previous two quarters. This economic downturn triggered a significant selloff on Wall Street, with major indices closing sharply lower on Wednesday. The Dow Jones Industrial Average fell by 690 points (1.7 percent), the S&P 500 declined by 2 percent, and the Nasdaq Composite slid by 2.6 percent.

The primary factor contributing to the GDP decline was a 41 percent surge in imports, driven by businesses stocking up in anticipation of potential tariffs. This data, released by the Commerce Department, stood in stark contrast to the 2.4 percent expansion observed in the December quarter. Private payroll data further contributed to the economic gloom, with ADP reporting only 62,000 new jobs in April, nearly half of what markets had anticipated.

The significant increase in imports, largely due to companies pre-emptively front-loading goods to avoid new tariffs, placed substantial downward pressure on Q1 GDP. Market sentiment, which had partially stabilized following an earlier selloff related to tariffs in early April, was once again negatively impacted as investors reassessed the risks associated with global supply chains and the potential for more reciprocal duties signaled by President Trump.

Adding to the concerns, private payroll data from ADP revealed that only 62,000 new jobs were added in April, falling well below Street estimates of 120,000. This soft labor market data heightened concerns that the US economy might be entering a slowdown.

In response to the GDP miss, President Trump used Truth Social to deflect blame onto the Biden administration, urging Americans to remain patient as his policy adjustments take effect. However, investors remained cautious, particularly with inflation still persistent and the Federal Reserve unlikely to implement rate cuts in the near future.

On the stock-specific front, Nvidia's stock price decreased by nearly 4 percent after server maker Super Micro Computer warned of weak Q3 earnings, resulting in an 18 percent crash in Super Micro Computer's stock. First Solar shares dropped by over 10 percent after its Q1 earnings per share (EPS) of $1.95 missed estimates of $2.49, leading the company to cut its full-year outlook. Snap shares plummeted by 16 percent after the firm declined to issue guidance, citing macroeconomic uncertainty. While Snap's Q1 revenue came in slightly above expectations at $1.36 billion, the company reported a per-share loss of 8 cents.

Earlier in the month, Wall Street had experienced a sharp recovery from April lows triggered by Trump’s tariff announcement. The S&P 500 had fallen nearly 20 percent from its February peak at one point. Hopes of a truce with India and China had helped mitigate losses. However, Wednesday’s renewed drop has largely erased those gains, underscoring the fragility of investor sentiment as May approaches.