Economic Data Fuels Stagflation Fears, Dragging Bitcoin and Stocks Lower

What initially appeared to be a positive day for the markets quickly turned negative after new economic data sparked concerns over stagflation.

The ADP jobs report for April, which was released two days ahead of the government’s official figures, showed just 62,000 private sector jobs were created. This was far below the expected 108,000 and much weaker than March’s 147,000. The figure represents the weakest job growth since July 2024.

Further contributing to the negative sentiment, the U.S. government’s first-quarter GDP estimate revealed a contraction of 0.3%, below the anticipated 0.2% growth. A significant factor in the decline was the early surge in imports, as businesses rushed to bring in goods ahead of expected tariffs, which led to a trade imbalance. The imbalance subtracted nearly 5% from the GDP growth for the quarter. Additionally, government spending under the Trump administration’s DOGE initiatives dampened the overall growth, marking the first time this has been a negative factor since 2022.

Inflation remained a key concern, with the Core PCE price index rising by 3.5%, well above the expected 3.1% increase. This added to the growing concerns that rising prices coupled with slowing growth could lead to stagflation.

The negative economic data led to a broad sell-off in U.S. stocks, with the Nasdaq down 2% and the S&P 500 falling 1.5%. Bitcoin followed the downward trend, dropping by around 1% to $94,300, as investors reacted to the combination of weak job growth, disappointing GDP data, and persistent inflation pressures.