US futures

Dow futures -0.71% at 40232

S&P futures -1.13% at 5492

Nasdaq futures -1.78% at 19206

In Europe

FTSE -0.18% at 8454

DAX -0.22% at 22399

• Stocks fall as GDP falls by -0.3% in Q1
• ADP payrolls fall to 62k
• Microsoft & Meta report after the close
• Oil falls for a third day and is down 16% in April

Stocks drop as the US economy contracts

U.S. stocks are falling on Wednesday amid the US data drop and ahead of earnings from Microsoft and Meta after the close.

US GDP was weaker than expected, contracting -0.3% in Q1 annualised, down from 2.4% in Q4 last year and below the 0.4% forecast. Consumer spending, which accounts for two-thirds of GDP, rose at its weakest pace since mid-2023. The data suggest that the US economy was under increasing strain even before this month’s tariffs announcement, raising the chance of a recession and lifting Fed rate cut expectations.

Meanwhile, ADP Payrolls were also considerably weaker than expected at 62k, down from 147k. The data doesn’t bode well for Friday’s non-farm payroll, which will provide further insight into the health of the labour market in the month following Liberation Day.

Attention is now turning to US core PCE, the Fed’s preferred gauge for inflation. Cooling inflation could support the view that the Fed could cut rates sooner.

Trump signed orders on Tuesday to soften the blow of his auto tariffs, and his team also announced its first trade deal with a foreign trading partner. Sentiment had been improving on hopes that the worst of the tariff announcements may be behind the market. Still, it's been a turbulent month on Wall Street, with the S&P 500 and the Nasdaq recovering from a brief dip into bear market territory to end the month flat. However, weak data could mean further gains will be limited.

Corporate news

Microsoft will report after the close, with investors looking for proof that AI investments are paying off and watching for any signs of customers slowing their spending due to the uncertainty created by Trump's trade tariffs. Expectations are for growth to slow and EPS of $3.21 on revenue of $68.4 billion.

Meta is due to report earnings and is expected to post EPS of $5.20 on revenue of $41.4 billion, up from EPS of $4.71 on revenue of $36.4 billion in Q1 2024. Advertising revenue is expected to reach 40.5 billion, while the reality labs segment is set to report an operating loss of 4.5 billion and revenue of 496 million. Earnings come as Meta’s price has fallen 5% since the start of the year, but is still up 28% over the past 12 months.

Starbucks is falling 8% after the coffee chain saw comparable sales decline for the fifth straight quarter. The company's turnaround strategy is struggling to produce results.

Snap fell 14% after posting better-than-expected Q1 Revenue but declined to provide guidance due to macroeconomic uncertainties, which could hit advertising demand.

Nasdaq 100 forecast – technical analysis.

The Nasdaq has recovered from its 16,320 low and is running into resistance at the 50 SMA at 19,500. Buyers, supported by the RSI above 50, will look to rise above here to bring 20k into focus and expose the 200 SMA at 20,200. Failure to retake the 50 SMA could see the test of the 19100 – 19300 support zone and 19000. Below here, the falling trendline support at 18500 comes into play.

FX markets – USD rises, EUR/USD falls

The USD is rising, recovering from its recent 3-year low amid hopes of easing trade tensions after Trump eased tariffs on autos and after US data.

The EUR/USD is falling despite Eurozone GDP beating expectations with a 0.4% increase in Q1, ahead of the 0.2% forecast. This marks the fifth straight quarter of growth and is up from the 0.2% growth in Q4 2024. German CPI data is due shortly.

GBP/USD is falling amid a stronger USD. UK business morale fell to its lowest level in three months amid concerns over the implications of Trump’s trade tariffs and the wider economy as higher employment costs take effect. The Lloyds business barometer fell 10% to 39% in April, its lowest since January.

Oil falls for a third day

Oil is falling for a third straight session, down almost 5% so far this week and is set to fall 16% this month, its most significant monthly decline since 2021. Fears of the global trade war hurting demand and rising supply have dragged WTI below $60 per barrel.

Concerns over the impact of Trump’s trade tariffs have hit the demand outlook. Today, Chinese manufacturing PMI data showed activity contracted to its weakest level in 166 months as the trade war bites.