US Stock Market Sees Significant Decline: Dow Drops Over 600 Points, Nasdaq Experiences Dip

US markets opened lower on Tuesday, reacting to unexpected economic data that revealed a contraction in the economy during the first quarter of 2025. Major indexes faced significant declines, with investor sentiment turning sour as fears of a potential recession resurfaced. The Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 all experienced notable drops, reflecting widespread concerns over the economic outlook.

Market Reactions to Economic Data

By 9:51 AM ET, the Dow Jones Industrial Average plummeted by 661.52 points, or 1.63%, settling at 39,866.1. The Nasdaq Composite followed suit, falling 440.63 points, or 2.52%, to reach 17,020.69. The S&P 500 also saw a decline of 2.02%, dropping to 5,448.47. This downturn came after the release of first-quarter GDP data, which indicated an unexpected contraction, raising fears that the US might be entering a technical recession characterized by two consecutive quarters of negative growth. The VIX, known as Wall Street’s fear gauge, surged by 14.48% to 27.67, marking its highest level in several months, signaling heightened investor anxiety.

Details of the GDP Contraction

The US economy contracted at an annual rate of 0.3% in the first quarter, according to preliminary estimates from the US Commerce Department. This decline followed a robust 2.4% growth in the final quarter of 2024. The contraction was primarily attributed to a surge in imports, slower consumer spending, and reduced government expenditures. The Commerce Department’s report highlighted that businesses were stockpiling imports in anticipation of potential tariffs introduced by President Donald Trump. The negative economic indicators prompted a swift response from financial markets, with futures dropping ahead of the opening bell on Wall Street.

Corporate Earnings and Market Sentiment

As the market reacted to the GDP report, premarket trading showed mixed results. S&P 500 futures fell by 0.3%, and Nasdaq futures dropped by 0.5%, while Dow Jones Industrial Average futures edged up by 0.1%. Notably, shares of Starbucks fell nearly 9% after the company reported disappointing sales and profits for the second quarter, despite achieving its first quarterly sales gain in over a year. In contrast, Visa’s shares rose slightly after the company exceeded Wall Street’s expectations for revenue and earnings, indicating that consumer spending remained resilient despite concerns over Trump’s tariffs. Investors were also looking forward to earnings reports from major tech companies like Microsoft and Meta, which were scheduled for release later in the day.

Global Economic Context

In Europe, the eurozone economy grew by 0.4% in the first quarter, showing improvement from the previous quarter. However, the outlook remains uncertain due to increased tariffs on exports from the eurozone. Germany’s DAX index rose by 0.7% following a coalition agreement that positioned Friedrich Merz as the next chancellor. Meanwhile, in Asia, Japan’s Nikkei 225 index gained 0.6%, while the Hang Seng index in Hong Kong added 0.5%. However, China’s Shanghai Composite index slipped by 0.2% amid reports of declining export orders from manufacturers. The ongoing trade tensions and tariff policies continue to create a complex economic landscape, with fears of a recession looming as businesses navigate these challenges.

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