Markets Swoon as U.S. Economy Contracts, Inflation Surprises to the Upside

What began as a hopeful trading session quickly turned sour Wednesday after a double blow of disappointing economic data reignited stagflation concerns.

Private payrolls, as measured by ADP, showed just 62,000 jobs added in April—barely half of what economists expected and the weakest figure in nearly a year. Moments later, the government’s first estimate for Q1 GDP revealed a surprise contraction of 0.3%, driven largely by a surge in imports and a slowdown in government spending amid new tariff policies.

Adding to the unease, core inflation came in hotter than anticipated. The core PCE index, embedded in the GDP report, rose 3.5%, well above the projected 3.1%.

The data sparked a sharp sell-off in equities. The Nasdaq dropped 2%, while the S&P 500 declined 1.5%. Bitcoin wasn’t spared, sliding 1% to around $94,300 as risk assets across the board took a hit.

Investors now face a complex outlook: cooling growth, stubborn inflation, and policy uncertainty—all of which could weigh on sentiment for weeks to come.