Stock markets drop on news that U.S. economy shrank amid tariffs
Global News
Such data raises the threat of a worst-case scenario called 'stagflation,' one where the economy stagnates yet inflation remains high.
U.S. stocks began Wednesday with a thud after a report suggested the U.S. economy may have shrunk at the start of the year.
But the big losses soon eased in the latest sharp swings to hit Wall Street amid uncertainty about what President Donald Trump’s trade war will do to the economy.
The S&P 500 was down 1.2 per cent in afternoon trading and on track to end a six-day winning streak.
The Dow Jones Industrial Average was down 316 points, or 0.8 per cent, as of 1:10 p.m. Eastern time, and the Nasdaq composite was 1.7 per cent lower.
They had been on track for much worse losses earlier in the morning, when the S&P 500 was down as much as 2.3 per cent and the Dow dropped 780 points.
Stocks sank after the report on the U.S. economy fell well short of economists’ expectations, a sharp turnaround from the economy’s solid pace of 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 raises the threat of a worst-case scenario called “stagflation,” one where the economy stagnates yet inflation remains high.
