“The best negative print I have ever seen in my life.” — Peter Navarro about Wednesday’s GDP report.
Chart of the Day
Good morning!
There’s no cure for a bad mood. And if ignored long enough, it will come back to bite you with disastrous consequences.
Markets realized this yesterday. After fresh economic data amplified recessionary concerns, the S&P 500 fell sharply but finished up 0.15%, while the Nasdaq Composite also suffered the same fate but ended the day down less than 0.1%.
Consumers and businesses have warned this year that they don’t feel all that good about President Donald Trump’s policies, which have thrown the stock and bond markets into relentless chaos. But those inclined to always seek a silver lining argued that the bad sentiment hasn’t actually influenced behavior in a meaningful way, and the possibility they might be correct helped the market regain some of its footing in recent days. The S&P 500 has rallied 1.5% over the past week.
That narrative came under fire Wednesday when the GDP report unveiled many important things, and no, we’re not just talking about the economy noting the first contraction since 2022. The decline was led by businesses massively pulling forward goods to get ahead of tariffs. Imports rose to 41.3% in the first quarter after being down 1.9% in the fourth quarter, which dragged down net exports, a contributor to GDP.
The report is a good example of how tariffs impact hard data, because businesses typically order goods weeks and sometimes months in advance of selling them.
It also reignited the soft data versus hard data debate among economists and investors who have been perplexed about the divergence, unsure of what to believe. Consumer confidence, for example, has sunk recently. But the fact that those types of soft data points are heavily influenced by political views gave them less credibility in some ways, so it wasn’t as worrying.
But now, hopes that the tariffs debacle would have calmed down by the time it shows up in the hard data have been washed over, as everyone scrambles to predict the direction of the economy.
Contrasting America’s plight, Europeans seem to be living it up. Roasted for years by their American peers for having little-to-no GDP growth, the Eurozone economy grew 0.4% in the first quarter, twice as high as the 0.2% of the previous quarter. Some believe the good times won’t last too long, as the surge in trade policy uncertainty is expected to hit investments in the second quarter.
While GDP got most of the attention, PCE offered some better news, coming in unchanged from a month ago. (Who knew markets could be so volatile even as inflation would no longer be the problem child?)
The economy was able to fight through a wave of poor soft data as recently as during Covid. Maybe it can do that again.
Share your thoughts
How do you feel about the economy right now? Click here to send us your response.
📧✍️Here’s what a reader commented📧✍️
Question: What are some other things that America needs to tackle before growing as a manufacturing powerhouse?
Answer: I used to import containers of merchandise manufactured in China. Most US importers pay a preproduction deposit upwards of 50% of the cost. If the order is canceled the deposit is lost. I don’t think this has changed. For small businesses this is devastating financially. I think the WH can find a way to make their point and get countries to the table without hurting small businesses.
Catch up with FS Insight
The 1Q25 GDP print of -0.3% is a sharp decline from 2024 growth rates, but this highlights that markets care more about 2026.
Technical
Technology cannot be underestimated and many of the Magnificent 7 stocks have traded up to important levels (and in some cases, have already exceeded them heading into earnings).
Crypto
Crypto rallied into the close, further buoyed by strong tech earnings (possibly leaked before the bell). While crypto is generally less sensitive to earnings than it is to rates, monetary, and fiscal policy, earnings do influence broader risk appetite and are worth noting.
News We’re Following
Breaking News
- Ukraine, US sign minerals deal sought by Trump RT
- Tesla Board Opened Search for a CEO to Succeed Elon Musk WSJ
- Tesla denies report that the EV maker is looking to replace Elon Musk CNBC
Markets and economy
- The Rush to Beat Tariffs Is Distorting the Economy. There’s More to Come. WSJ
- Home Builders Are Piling on Discounts as They Struggle to Entice Buyers WSJ
- A Flashing Economic Warning and a Sharp Political Jolt NYT
Business
- McDonald’s US sales drop by most since height of pandemic FT
- GM lowers 2025 guidance, citing up to $5 billion in tariff exposure CNBC
- Microsoft shares jump after strong AI demand lifts cloud unit FT
- Meta shares rise on stronger-than-expected revenue for first quarter CNBC
- Court finds Apple, executive lied under oath in Epic Games trial CNBC
Politics
- RFK Jr. Bets $500 Million on Universal Vaccines in Shift From Covid-19 Funding WSJ
- Defiant Trump says trade war risks needed to ‘save the country’ SEM
- Harris Returns to Political Life, Warning of a Constitutional Crisis NYT
Overseas
- Beijing Doesn’t Want America to See Its Trade-War Pain WSJ
- Foreign companies flock to ‘panda bond’ market in hunt for China hedge FT
Of Interest
- Republicans and Democrats Can Agree on This: Stop Minting Pennies WSJ
- How Pope Francis failed to fix the Vatican’s finances FT
| Overnight |
| S&P Futures +70
point(s) (+1.3%
) Overnight range: +28 to +73 point(s) |
| APAC |
| Nikkei +1.13%
Topix +0.46% China SHCOMP flat Hang Seng flat Korea flat Singapore flat Australia +0.24% India flat Taiwan flat |
| Europe |
| Stoxx 50 flat Stoxx 600 +0.03% FTSE 100 -0.04% DAX flat CAC 40 flat Italy flat IBEX flat |
| FX |
| Dollar Index (DXY) +0.39%
to 99.85 EUR/USD -0.06% to 1.1321 GBP/USD -0.06% to 1.3321 USD/JPY +0.88% to 144.33 USD/CNY flat at 7.2714 USD/CNH +0.06% to 7.2741 USD/CHF +0.17% to 0.8272 USD/CAD +0.16% to 1.3821 AUD/USD -0.34% to 0.638 |
| Crypto |
| BTC +0.99%
to 95519.95 ETH +1.49% to 1821.4 XRP +0.78% to 2.2158 Cardano +2.47% to 0.7012 Solana +3.12% to 151.63 Avalanche +1.72% to 21.28 Dogecoin +1.9% to 0.1768 Chainlink +4.14% to 14.9 |
| Commodities and Others |
| VIX -3.97%
to 23.72 WTI Crude -2.22% to 56.92 Brent Crude -5.24% to 59.81 Nat Gas +2.65% to 3.41 RBOB Gas -2.16% to 1.993 Heating Oil -3.13% to 1.973 Gold -1.98% to 3223.72 Silver -1.44% to 32.15 Copper +1.03% to 4.607 |
| US Treasuries |
| 1M -0.8bps
to 4.281% 3M -1.1bps to 4.275% 6M -3.5bps to 4.1388% 12M -0.6bps to 3.8448% 2Y -0.0bps to 3.6025% 5Y -0.4bps to 3.7228% 7Y -1.0bps to 3.9253% 10Y -1.5bps to 4.1465% 20Y -1.9bps to 4.6739% 30Y -1.7bps to 4.6607% |
| UST Term Structure |
| 2Y-3
M Spread narrowed 1.2bps to -69.8
bps 10Y-2 Y Spread narrowed 1.5bps to 54.0 bps 30Y-10 Y Spread narrowed 0.0bps to 51.2 bps |
| Yesterday's Recap |
| SPX +0.15%
SPX Eq Wt +0.14% NASDAQ 100 +0.13% NASDAQ Comp -0.09% Russell Midcap -0.09% R2k -0.63% R1k Value +0.14% R1k Growth +0.11% R2k Value -0.74% R2k Growth -0.52% FANG+ -0.03% Semis +0.47% Software -0.03% Biotech +1.31% Regional Banks -1.15% SPX GICS1 Sorted: Healthcare +0.89% Indu +0.8% Cons Staples +0.71% REITs +0.56% Materials +0.51% Tech +0.42% Fin +0.21% SPX +0.15% Comm Srvcs -0.26% Utes -0.48% Cons Disc -1.11% Energy -2.61% |
| USD HY OaS |
| All Sectors +12.6bp
to 434bp All Sectors ex-Energy +9.8bp to 388bp Cons Disc +13.8bp to 431bp Indu +9.8bp to 328bp Tech +10.4bp to 407bp Comm Srvcs +8.8bp to 616bp Materials +10.8bp to 412bp Energy +27.5bp to 494bp Fin Snr +9.4bp to 358bp Fin Sub +6.7bp to 298bp Cons Staples +7.6bp to 300bp Healthcare +12.7bp to 438bp Utes +8.4bp to 298bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 5/1 | 9:45AM | Apr F S&P Manu PMI | 50.5 | 50.7 |
| 5/1 | 10AM | Apr ISM Manu PMI | 47.9 | 49.0 |
| 5/2 | 8:30AM | Apr AHE m/m | 0.3 | 0.3 |
| 5/2 | 8:30AM | Apr Unemployment Rate | 4.2 | 4.2 |
| 5/2 | 8:30AM | Apr Non-farm Payrolls | 135.0 | 228.0 |
| 5/2 | 10AM | Mar F Durable Gds Orders | 9.2 | 9.2 |
| 5/5 | 9:45AM | Apr F S&P Srvcs PMI | n/a | 51.4 |
| 5/5 | 10AM | Apr ISM Srvcs PMI | 50.1 | 50.8 |
| 5/6 | 8:30AM | Mar Trade Balance | -119.5 | -122.662 |
| 5/7 | 2PM | May 7 FOMC Decision | 4.5 | 4.5 |