Market Turns Negative as Latest Economic Data Fuel Stagflation Fears

What one hour ago was looking like another positive day in markets has turned decidedly negative as the latest economic data fueled growing stagflation fears.

The promise of a positive Thursday in the markets has soured somewhat as the latest economic data has fueled further stagflation fears.

In the days leading up to the government's own employment numbers, ADP's report on private-sector jobs created in April came in well below expectations on Thursday.

The report showed jobs at 62,000, compared to estimates of 108,000 and March's 147,000. It was also the weakest reading since July 2024.

Later in the session, the government's first estimate of first quarter GDP growth showed a decline of 0.3%, compared to economists' forecasts of 0.2%.

While the quarter ended in March, economic actors — fully aware of coming tariffs — front-loaded imports earlier in the year. As any Econ 101 student can attest, rising imports (absent a corresponding gain in exports) are a drag on GDP growth.

Indeed, the export-import imbalance cut GDP growth by nearly 5 percentage points in the first quarter. Also weighing on the top-line reading was the Trump administration's efforts to lower the trade deficit, with government spending acting as a drag on GDP for the first time since 2022.

Turning to inflation, the Core PCE price index embedded within the GDP report showed a rise of 3.5%, compared to forecasts for a gain of 3.1%.output: The upbeat tone in Thursday's markets soured somewhat as the latest economic data had investors adjusting their stagflation fears.

Coming two days ahead of the government's own employment numbers, ADP's report on private-sector jobs created in April showed an increase of 62,000. This was significantly lower than economists' predictions of 108,000 and March's figure of 147,000. Moreover, it marked the weakest reading since July 2024.

Later in the session, the government's first estimate of first quarter GDP growth revealed a decline of 0.3%, contrasting with economists' forecasts of 0.2%.

While the quarter ended in March, economic actors, anticipating the upcoming tariffs, decided to accelerate their imports at the beginning of the year. As any Econ 101 student can attest, a surge in imports, unaccompanied by a parallel increase in exports, exerts a downward pull on GDP growth.

In fact, the disparity between exports and imports slashed GDP growth by nearly 5 percentage points in the first quarter. Additionally, the Trump administration's efforts to reduce the trade deficit, which involved government spending serving as a drag on GDP for the first time since 2022, further contributed to the decline.

Focusing on inflation, the Core PCE price index, a key measure of price stability, was reported to have risen by 3.5%. This finding exceeded economists' estimations of a 3.1% increase.