U.S. Manufacturing Hits Five-Month Low Due to Tariff Pressures; Nasdaq Surges on Tech Earnings as Jobless Claims Rise

U.S. manufacturing activity fell to a five-month low in April, with the ISM PMI dropping to 48.7 due to tariff-related pressures. Despite this, the Nasdaq Composite rose over 2% following strong earnings from Microsoft and Meta. Weekly jobless claims increased to a two-month high, with continuing claims at their highest since November 2021, indicating a cooling labor market. Treasury yields rose as rate cut expectations eased. The market remains volatile amid ongoing tariff uncertainties, with some companies like General Motors and Dominion Energy reporting significant financial impacts.

Manufacturing Activity Contracts Under Tariff Strain

U.S. manufacturing activity continued its downward trajectory in April, with the ISM’s PMI falling to 48.7 from 49 in March. A reading below 50 indicates contraction. This marks the lowest level since November 2024 and reflects the mounting pressure on manufacturers from shifting trade policies and rising input costs.

Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, noted that “demand and output weakened while input strengthened further, conditions that are not considered positive for economic growth.” Survey respondents across various industries described a “state of near paralysis,” according to Jefferies U.S. economist Thomas Simons, as companies struggled to adapt to the evolving tariff landscape.

In a separate report, S&P Global’s manufacturing PMI held steady at 50.2, barely above the contraction threshold. However, S&P Global highlighted that tariffs had driven up both input and selling prices, further straining margins. Paul Gruenwald, chief economist at S&P Global Ratings, remarked that the effects of policy uncertainty were now “starting to show up in the real data.”

The manufacturing slowdown comes amid broader concerns about the economic impact of Trump’s trade policies. General Motors, for instance, estimated that tariffs would cost the company between $4 million and $5 million in revenue this year, prompting a downward revision of its profit outlook. Similarly, Dominion Energy warned that tariffs could add up to $500 million to the cost of its Coastal Virginia Offshore Wind project.

Nasdaq Surges on Microsoft and Meta Earnings

Despite the manufacturing slump, Wall Street found relief in robust earnings from Big Tech. The Nasdaq Composite jumped 1.5% on Thursday, leading U.S. stock indexes higher. Microsoft and Meta both exceeded Wall Street expectations for quarterly profits, with Microsoft reporting strong cloud bookings and Meta offering upbeat guidance despite concerns over a potential advertising slowdown.

Microsoft shares surged approximately 8%, while Meta climbed around 5%, helping to offset broader market jitters tied to trade tensions and economic data. The S&P 500 rose 0.6%, and the Dow Jones Industrial Average added 0.2%, extending its longest winning streak of the year.

Investors welcomed the results as a sign that corporate spending on artificial intelligence, cloud infrastructure, and digital advertising remains resilient, even as the broader economy shows signs of strain. The earnings reports also helped stabilize markets after a volatile April, during which stocks were whipsawed by tariff announcements and geopolitical uncertainty.

Labor Market Shows Signs of Weakening

The U.S. labor market, long a pillar of economic strength, is beginning to show signs of softening. The Department of Labor reported that initial jobless claims rose by 18,000 to 241,000 for the week ending April 26, the highest level since late February and well above economists’ expectations of 223,000. Continuing claims climbed to 1.916 million, the highest since November 2021.

The increase in continuing claims suggests that unemployed workers are taking longer to find new jobs, a potential sign of reduced labor demand. This trend is reinforced by data from the Bureau of Labor Statistics, which showed that job openings fell to 7.19 million in March, down from 7.48 million in February. This marks the lowest level of job openings since September 2024.

The Job Openings and Labor Turnover Survey (JOLTS) also revealed that the ratio of job openings to unemployed workers dropped to 1.02, the lowest since the post-pandemic recovery began. During the height of the recovery in 2022, this ratio was closer to 2:1.

Private payroll data from ADP added to the cautious outlook, showing that only 62,000 jobs were added in April, significantly below the 115,000 expected and the 147,000 added in March. This represents the smallest increase in private payrolls since July 2024.

Treasury Yields Rise as Rate Cut Bets Ease

In response to the mixed economic data, U.S. Treasury yields rose on Thursday as investors scaled back expectations for interest rate cuts. The two-year yield, which is particularly sensitive to Federal Reserve policy, climbed 10 basis points. The move followed the release of factory data that, while weak, was not as dire as some had feared.

The bond market’s reaction reflects a recalibration of monetary policy expectations, as investors weigh the implications of persistent inflation pressures and a slowing but still resilient labor market.

Market Volatility Persists Amid Tariff Uncertainty

April proved to be one of the most volatile months for U.S. equities in recent memory. The S&P 500 experienced sharp swings, driven largely by uncertainty surrounding Trump’s tariff policies. The Vanguard S&P 500 ETF (VOO), the world’s largest exchange-traded fund, saw a record $21 billion in inflows during the month, as investors sought exposure to broad market indices amid the turbulence.

While some companies, like Microsoft and Meta, have managed to weather the storm, others have not fared as well. McDonald’s reported a first-quarter earnings miss, citing consumer uncertainty linked to tariffs. The company’s CEO noted that Americans are “grappling with uncertainty,” and shares fell more than 1% following the report.

As the administration signals potential trade negotiations with China, markets remain on edge. A social media post from a Chinese state-affiliated account suggested that the U.S. had reached out to resume talks, though no formal announcements have been made.

References

• Manufacturing activity hits 5-month low as Trump tariffs leave businesses in 'state of near paralysis'
• Continuing jobless claims reach highest level since November 2021, initial claims hit 2-month high
• Stock market today: Nasdaq surges as AI trade reignites amid Big Tech earnings, Dow, S&P 500 rise for 8th day
• Number of Americans filing for jobless claims jumps last week
• GM Pours Cold Water Over Trump’s Tariff Claims With New Prediction