US stocks dragged down by weak earnings as economy stumbles

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Wall Street stocks fell on Wednesday morning after weak US growth data fuelled a broad based sell-off driven by a flurry of weak corporate earnings.

The blue-chip S&P 500 sank 2 per cent in early trading in New York, threatening to break a six-day winning streak.

Starbucks tumbled 9 per cent after the coffee chain said late on Tuesday that quarterly net income halved year on year, while server maker Super Micro Computer — a key supplier for chip giant Nvidia — dropped as much as 20 per cent after providing revenue and earnings per share guidance far below analysts’ expectations. 

Nvidia fell almost 4 per cent and Tesla dropped 6 per cent, dragging the tech-heavy Nasdaq Composite down 2.6 per cent shortly after the opening bell.

Wednesday’s moves came after data showed the US economy contracted for the first time since 2022, shrinking by an annualised 0.3 per cent over the first three months of this year as companies rushed to buy imported goods in anticipation of Donald Trump’s steep tariffs on most countries.

“Inflation was also more elevated, fuelling the stagflation narrative and limiting what the Federal Reserve can do to help as economic sentiment sours,” said James Knightley, chief international economist at ING.

Consumer and business sentiment has plunged across the US in the wake of Trump’s aggressive tariff announcements, even as the stock market has rebounded in recent weeks after the bulk of the levies were postponed for 90 days.

“The economy was essentially stagnant in the first three months of the year, while growth in headline and core inflation accelerated,” said Ryan Sweet, chief US economist at Oxford Economics.

Concerns about the health of the world’s biggest economy hit commodity markets, with Brent crude, the international oil benchmark, down 1.5 per cent at $63.27 a barrel.

European equities were also lower, with the region-wide Stoxx Europe 600 down 0.6 per cent and Germany’s Dax losing 0.7 per cent.