The S&P 500 (SPX) is trading slightly in the red, despite the U.S. Bureau of Economic Analysis announcing its second estimate of gross domestic product (GDP) at 3.3%, higher than its first estimate of 3.0% and reversing a first quarter drop of 0.5%. Economists forecast 3.1% growth for the second quarter.
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Falling imports and rising consumer spending contributed to the recovery in GDP. During the first quarter, businesses rushed to front-run imports ahead of the Trump administration’s tariffs, reducing GDP in the process.
Spending Supports GDP as S&P 500 Takes a Breather
Consumer spending accounts for about 70% of GDP and increased by 1.6% compared to 0.5% during the first quarter. While growth remains tepid, consumers are still spending in light of a surge in tariff rates.
Given the S&P 500’s reaction, investors may have already priced in the second estimate of GDP. The benchmark index is up by about 30% since the April low, meaning that a pullback could be necessary in order to set up for the next leg higher.
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