US Corporate Profits See Biggest Drop Since 2020 COVID Crash As Economic Worries Resurface: Retail Traders Are Bearish

U.S. corporate profits in the first quarter registered their sharpest drop since the last three months of 2020, when the COVID-19 pandemic ravaged the world, as concerns over the economy's health have reemerged amid macroeconomic worries.

According to U.S. Bureau of Economic Analysis (BEA) data, corporate profits with inventory valuation and capital consumption adjustments fell $118.1 billion in the first quarter, compared to a $204.7 billion rise in the previous quarter.

BEA’s revised data also show that the U.S. GDP shrank at an annual rate of 0.2% in the first quarter of 2025, following a jump in imports and a decline in government spending. This compares to a 2.4% increase in the fourth quarter of 2024.

The decline in GDP was attributed to increased imports and a fall in government spending. Several businesses rushed to bring in goods from abroad ahead of President Trump’s “Liberation Day” tariffs.

While the manufacturing investment showed signs of growth, U.S. consumer spending growth was revised down by the BEA.

The BEA also reported that real gross domestic income (GDI) fell 0.2% in the first quarter, in contrast to an increase of 5.2% in the fourth quarter.

Several companies, ranging from automakers to airlines and retailers, pulled or adjusted their forecasts amid uncertainties over tariff policy.

Legal cases surrounding the tariffs have further complicated the outlook for businesses. On Thursday, a federal court temporarily reinstated the broad tariffs on imports after a U.S. trade court ruled that Trump exceeded the authority the International Emergency Economic Powers Act granted in imposing the levies.

The Federal Reserve has also taken a cautious approach despite Trump’s repeated calls to lower interest rates.

Stocktwits Sentiment Index has shown that retail traders were also mostly bearish about U.S. markets during the first quarter.

The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, has gained 0.1% this year, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq Composite, is up 1.1%.

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