US Stock Market Crash: Sharp Declines as GDP Contraction Sparks Recession Fears
The US stock market plunged after fresh data revealed a surprise contraction in GDP for Q1 2025, stoking recession concerns and unsettling investors. The Dow Jones Industrial Average sank over 600 points, while the Nasdaq Composite dropped more than 2%, reflecting widespread unease.
- The Dow fell 661.52 points (-1.63%) to 39,866.10.
- The Nasdaq dropped 440.63 points (-2.52%) to 17,020.69.
- The S&P 500 declined 2.02%, settling at 5,448.47.
These losses coincided with a jump in the VIX, Wall Street’s fear gauge, which spiked 14.48% to 27.67—its highest level in months, signaling intense market volatility.
Unexpected GDP Decline Fuels Recession Talk
The first-quarter GDP data released by the US Commerce Department showed a 0.3% annualized contraction, compared to a 2.4% expansion in the prior quarter. This decline was largely attributed to an increase in imports, sluggish consumer spending, and reduced government outlays.
- Economists define a technical recession as two consecutive quarters of negative GDP growth.
- The unexpected downturn has revived fears that the US economy is nearing recession territory.
President Donald Trump’s tariff strategy is seen as a major contributor, with businesses stockpiling imports in anticipation of expanded trade barriers, further distorting economic data.
Market Reaction Across Asset Classes
Investors adopted a risk-off approach, shifting capital into traditionally safer assets.
- Gold prices remained relatively stable, dipping 0.16% to $3,328.40.
- Crude oil prices fell 1.41% to $59.57, as demand expectations weakened alongside the economic outlook.
- The US 10-Year Treasury yield edged down to 4.166%, signaling flight-to-safety sentiment.
- In currency markets, the euro weakened against the US dollar, with EUR/USD at 1.137.
Political Uncertainty Adds to Market Jitters
The market turbulence is compounded by concerns over President Trump’s tariff policies, which have introduced a high level of uncertainty into business planning.
- Democratic leaders criticized Trump’s approach, with Senator Elizabeth Warren stating it was “dragging down the economy.”
- Wall Street remains anxious amid the lack of clear economic direction from the administration.
These anxieties were evident in premarket activity, with S&P 500 futures down 0.3%, Nasdaq futures slipping 0.5%, and Dow futures barely up 0.1%.
Corporate Earnings Show Mixed Signals
Amid the economic gloom, corporate earnings added another layer of complexity to investor sentiment.
- Starbucks stock plunged nearly 9% after missing both sales and profit expectations, despite achieving its first quarterly sales gain in over a year.
- Visa shares edged up, buoyed by stronger-than-expected Q2 revenue and earnings, indicating resilient consumer spending.
Investors were awaiting earnings reports from tech giants Microsoft and Meta, which are expected to influence broader market direction after the bell.
Global Markets: Mixed Reactions as Trade Pressures Persist
Global stock markets responded variably to US economic developments and trade tensions, particularly those impacting European and Asian exporters.
- In Europe, Germany’s DAX and France’s CAC 40 both climbed 0.7%, buoyed by political developments.
- The UK’s FTSE 100 edged up 0.2%, but analysts remain cautious amid tariff-related uncertainties.
- In Asia, Japan’s Nikkei 225 gained 0.6%, boosted by tariff relief on car imports, though individual automaker stocks were mixed.
Other Asian markets showed divergent trends:
- Hong Kong’s Hang Seng rose 0.5%,
- Shanghai Composite slipped 0.2% due to weakened export data,
- South Korea’s Kospi fell 0.3%,
- Australia’s ASX 200 jumped 0.7%, driven by domestic economic resilience.
Energy and Forex Markets Reflect Growing Economic Concerns
The energy sector reflected global demand concerns, with both major benchmarks falling:
- US crude dropped to $59.97 per barrel,
- Brent crude fell to $62.85 per barrel.
Meanwhile, in the foreign exchange market:
- The US dollar strengthened to 142.93 yen,
- The euro dipped slightly to $1.1379, further evidencing global market reactions to US trade policy.