By Sam Goldfarb

U.S. stocks staged a late rally Wednesday to end one of their wildest-ever months on a high note, overcoming early-session declines that followed a weak report on economic growth.

Stocks initially fell after new data showed the U.S. economy shrank during the first three months of the year -- its first contraction since the start of 2022. Indexes rebounded, however, with investors cautioning against reading too much into the data, which was distorted by a flood of imports generated by businesses rushing to stock inventories ahead of new tariffs.

The Dow Jones Industrial Average rose 0.3%, or around 142 points, Wednesday, to finish April down 3.2%. The S&P 500 edged up 0.1%, ending the month down 0.8%. The tech-heavy Nasdaq Composite fell around 0.1%, but gained 0.9% in April.

Both the Dow and the S&P 500 have climbed for seven straight sessions, with the S&P 500 posting its largest percentage gain over that length of time since November 2020.

Wednesday's moves capped a tumultuous stretch on Wall Street, marked by the biggest stock declines since the early days of the Covid pandemic, huge single-day surges and similar swings in other investments, such as U.S. Treasurys. Despite the violence of the daily shifts, the monthly changes in major indexes were muted, with the S&P 500 falling less in April than it did in March.

Providing reason for investors to hope, the Trump administration has taken several steps to soften its trade policies. Those include its 90-day pause of "reciprocal" tariffs and its exemption of tech products from its steep duties on Chinese imports. Still, Trump has continued to broadly celebrate the merits of tariffs, and his administration has yet to strike any formal trade deals with other countries.

Meanwhile, investors are still flying blind about how tariffs will impact the economy, left to weigh dismal consumer sentiment data against solid, but backward-looking reports on household spending and business investment.

Stock gains in recent weeks were "really just an eye-of-the-storm phenomenon," said Jeff Blazek, multiasset co-chief investment officer at Neuberger Berman. "We just didn't have a lot of data to look at for a week or so."

Earlier in the month, it looked like it would be much worse for stocks. Caught off guard by the scale of Trump's trade restrictions, major indexes tumbled in the wake of the president's tariff announcement on April 2, with the S&P 500 falling nearly 11% over just three trading days.

The recovery, though, came quickly. Signs of mounting stress in the bond market helped spur Trump to pause reciprocal tariffs on April 9. Investors got another scare early last week when Trump's threats to fire Federal Reserve Chair Jerome Powell sent markets reeling again. But they bounced back once more, as Trump walked back from those warnings.

Shares of large technology companies have been at the forefront of market swings both on the way down and on the way up. Apple, for one, took a major hit due to its reliance on Chinese manufacturing -- only to shoot higher after the administration announced its exemptions of phones, computers and other tech devices.

The iPhone maker gained 0.6% Wednesday to end the month down 4.3%.

In a sign of continued nervousness about the economy, investors have favored sectors seen as safer bets during slowdowns, such utilities and consumer staples. Banks and energy companies, which are more sensitive to growth, have lagged behind.

One concern of investors is that stocks still look relatively costly on a historical basis, as measured by price to earnings ratios and other measures that take into account the risk-free return that investors can get by holding Treasurys to maturity.

Jack Ablin, chief investment officer at Cresset Capital, said he has been modestly encouraged by recent signals from the administration. But he remains cautious about stocks, seeing their valuations as still lofty.

"There's still unfortunately some wood to chop there," he said.

As much as investors have welcomed Trump scaling back some of his tariffs, they have arguably been even more pleased by the overall impression that the administration is sensitive to market developments. That has led many to believe that Trump will take further measures to ease tariffs if economic data sours and markets plunge again.

Trump, on Wednesday, sent a mixed message on that front, making it clear that he was watching stocks but also blaming recent declines on his predecessor, Joe Biden.

"This is Biden's Stock Market, not Trump's," he wrote in a social-media post. He added: "Tariffs will soon start kicking in, and companies are starting to move into the USA in record numbers."

Outside of stocks, markets have generally calmed in recent weeks. Treasurys, which first rallied and then sold off in alarming fashion following Trump's April 2 announcement, have since posted solid gains, dragging yields lower.

The yield on the benchmark 10-year note settled Wednesday at 4.173%, according to Tradeweb, down from 4.245% a month earlier.

The dollar, another source of concern, has also stabilized, though it has largely held its early-month declines against other currencies such as the euro.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

April 30, 2025 16:46 ET (20:46 GMT)

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