Stock Market Update

[BRIEFING.COM] The stock market initially gave back some of its recent gains today. The rebound mentality was still present, however, leading major equity indices to close well off session lows. 

The S&P 500, which dropped as much as 2.3% at its low, closed 0.2% above its prior close. 

The initial drop was driven in part by stagflation concerns following a disappointing Q1 GDP report, which showed a 0.3% contraction in growth alongside a 3.7% rise in the GDP Price Deflator. A modest increase of 62,000 private payrolls in April, per the ADP Employment Change Report, added to the unease.

Another headwind for stocks today was consumer spending anxiety amplified by underwhelming earnings from Starbucks (SBUX 80.05, -4.80, -5.7%) and Norwegian Cruise Line Holdings (NCLH 16.03, -1.35, -7.8%), raising questions about discretionary demand.

The subsequent recovery off session lows in the major indices coincided with the 10:00 a.m. ET release of the March Personal Income and Spending Report, which showed flat month-over-month readings for both the headline and core PCE Price Index—offering a touch of relief on the inflation front. 

Seven S&P 500 sectors ultimately closed in the green while four sectors registered declines. The health care (+0.9%) and industrial (+0.8%) sectors led the pack while the energy (-2.6%) and discretionary (-1.1%) sectors saw the largest declines.

Reviewing today's economic data:

• Mortgage Applications Index -4.2% wk/wk, with refinance applications down 4% and purchase applications down 4%.
• The April ADP Employment Change Report showed an estimated 62,000 jobs were added to private-sector payrolls (Briefing.com consensus 128,000), and the pay for job-stayers rose 4.5% year-over-year, which was a slight deceleration from March.
• The Q1 Employment Cost Index was up 0.9%, as expected, for the three-month period ending in March 2025, following a 0.9% increase for the three-month period ending in December 2024. Wages and salaries increased 0.8%, versus 1.0% for the prior quarter, and benefit costs jumped 1.2%, versus 0.8% for the prior quarter.
  • The key takeaway from the report is that employment costs have softened year-over-year, with compensation costs increasing 3.6% for the 12 months ending in March 2025, versus 4.2% for the 12 months ending in March 2024.
• The Adv. Q1 GDP report showed a 0.3% decline in real GDP (Briefing.com consensus 0.4%), with net exports subtracting 4.83 percentage points from growth, following a 2.4% increase in Q4. The GDP Price Deflator jumped 3.7% (Briefing.com consensus 3.1%) following a 2.3% increase in Q4.
  • The key takeaway from the report is that there was obvious frontrunning of the tariff measures, which showed up in a 41.3% increase in imports. Separately, consumer spending growth was decent at 1.8%, yet that was a marked slowdown from the 4.0% growth seen in Q4.
• April Chicago PMI 44.6 vs. 46.0 Briefing.com consensus; prior 47.6.
• Personal income increased 0.5% month-over-month in March (Briefing.com consensus 0.4%) after increasing a revised 0.7% (from 0.8%) in February. Personal spending rose 0.7% month-over-month (Briefing.com consensus 0.4%) after increasing a revised 0.5% (from 0.4%) in February. The PCE Price Index was unchanged month-over-month (Briefing.com consensus 0.0%), which left it up 2.3% year-over-year versus a revised 2.7% (from 2.5%) in February. The core-PCE Price Index was also unchanged month-over-month (Briefing.com consensus 0.1%), which left it up 2.6% year-over-year versus a revised 3.0% (from 2.8%) in February.
  • The key takeaway from the report is that it showed an acceleration in spending as consumers prepared for the implementation of tariffs. The PCE Price Index decelerated to 2.3% year-over-year from 2.7% while the core PCE Price Index decelerated to 2.6% year-over-year from 3.0%, making for a welcome sight.
• March Pending Home Sales up 6.1% (Briefing.com consensus -0.2%); prior revised to 2.1% from 2.0%

Looking ahead, market participants receive the following data on Thursday: 

• 8:30 ET: Weekly Initial Claims (Briefing.com consensus 225,000; prior 222,000) and Continuing Claims (prior 1.841 mln)
• 9:45 ET: Final April S&P Global U.S. Manufacturing PMI (prior 50.2)
• 10:00 ET: March Construction Spending (Briefing.com consensus 0.3%; prior 0.7%) and April ISM Manufacturing Index (Briefing.com consensus 47.9%; prior 49.0%)
• 10:30 ET: Weekly natural gas inventories (prior +88 bcf)