Stocks slumped, bond yields fell and the dollar waffled after weaker U.S. jobs and manufacturing reports fanned jitters that economic growth is even more sluggish than feared.
Some economists already peg first quarter growth at less than 1 percent, but the weaker-than-expected ADP private sector jobs report suggests that the economic malaise may now have spread to labor. Jobs had been one part of the economy that was insulated from the economic weakness, blamed on the harsh winter weather and strengthening dollar.
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"The data's bad. Earnings growth is deteriorating and how many times are we going to keep buying stocks because the Fed may not raise rates," said Peter Boockvar, chief market analyst at the Lindsey Group.
Treasury yields moved to lows after ISM manufacturing data unexpectedly slipped to 51.5 from 52.5, and new orders and the employment component were both lower. The 10-year bond was yielding 1.86 percent.
Stocks were down sharply but pared some of their losses by midday. The Dow had been down nearly 200 points, and the S&P 500 was down 13 points at 2,054.
A selloff on April Fools' Day is relatively unusual. In the last 10 years, there have only been two other instances-in 2013 and 2005, according to CNBC's analytic's partner Kensho.
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The ADP report also makes it likely economists will pare back expectations for Friday's government employment report, now expected at 245,000 new jobs. According to Thomson Reuters, the unemployment rate is also expected to remain unchanged at 5.5 percent.
"On the margin, this is going to moderate people's expectations for Friday. The lowest (ISM jobs) component since May 2013, and the lackluster ADP report has taken some of the more ambitious bias away from Friday's number," said Ian Lyngen, senior Treasury strategist at CRT Capital.
Economists have been expecting a spring back in the second quarter though the first quarter forecasts could continue to look even weaker. Thursday's trade data could have economists reducing growth forecasts even further as exports are likely to have been pinched by the higher dollar. According to the CNBC/Moody's Analytics rapid survey, economists expect growth of 1.3 percent for the first quarter.
Economists have been writing off the first quarter as a weak period, impacted by winter weather. The dollar impact, however, could be a factor that creeps into the second quarter, and the extent of its influence is a concern.