- Nasdaq Composite falls 1.01% as economic concerns outweigh tech earnings optimism.
- U.S. GDP contracts 0.3% in Q1 2025, marking first decline in three years.
- Tech sector volatility persists despite strong AI-driven performance from Microsoft, Meta, and Nvidia.
Market Retreats on Growth Concerns
The tech-heavy Nasdaq Composite dropped 1.01% Thursday, erasing earlier gains fueled by strong earnings from Microsoft and Meta Platforms. The reversal came after a surprise GDP report showed the U.S. economy contracted 0.3% on an annualized basis in Q1 2025—the first decline since 2022.
"The GDP print was the cold water investors didn't want," said one trader at a major Wall Street firm who asked not to be named. "Even with stellar tech numbers, you can't ignore the macro picture deteriorating."
Sector Rotation Accelerates
While AI-focused tech stocks had led a midweek rally, Thursday saw broad-based selling with energy and consumer discretionary sectors underperforming. The CBOE Volatility Index (VIX) spiked 12% intraday as declining stocks outnumbered advancers by nearly 3-to-1 on the NYSE.
Market participants noted particular sensitivity to trade policy uncertainty, with the Trump administration yet to clarify its stance on proposed tariffs. "When growth concerns meet policy ambiguity, you get this kind of whipsaw action," the trader added.
Earnings vs. Economics
Microsoft and Meta had initially buoyed sentiment with better-than-expected results tied to AI infrastructure spending. Nvidia also gained early before giving back profits. But by afternoon trading, only 3 of the Magnificent 7 stocks remained in positive territory.
The GDP surprise—analysts had expected 0.5% growth—overshadowed these company-specific stories. Treasury yields fell sharply as money moved into bonds, with the 10-year note dropping below 4.3%.
Correction: An earlier version misstated the direction of Treasury yields. They fell, not rose.