The S&P 500 pulled back 0.38% to 7,337.11 on Thursday, May 7, retreating from Wednesday’s record 7,365 as oil regained ground with WTI settling at $94.81 and Brent at $100.06 while markets awaited Iran’s response to the US peace proposal.
German factory orders exploded 5.0% month-on-month (consensus 1.0%), the strongest reading in years, but European construction PMIs collapsed to 41.7 with UK construction crashing to 39.7 (consensus 45.8). Initial jobless claims came in at 200,000 (below the 205,000 consensus), continuing claims fell to 1.766 million, and unit labor costs rose just 2.3% (below 2.6% expected).
Banxico cut 25 basis points to 6.50%, and Brazil industrial production beat at 4.3% year-on-year. Nonfarm payrolls for April are due this morning at 8:30 ET with consensus near 60,000.
The Big Three
• German factory orders surged 5.0% MoM (consensus 1.0%), a five-fold beat driven by defense procurement and front-loaded industrial demand, even as the eurozone construction PMI collapsed to 41.7 and UK construction crashed to 39.7.
• Initial claims at 200,000 (below 205,000 consensus) with continuing claims falling to 1.766 million, the lowest in over two years, and unit labor costs rising just 2.3% versus 2.6% expected, ahead of Friday’s payrolls.
• Banxico cut 25 bps to 6.50% as Mexico enters recession (Q1 GDP -0.8% QoQ), while Brazil industrial production beat at 4.3% YoY (consensus 3.5%) and consumer credit surged $24.86 billion (consensus $12.50 billion).
Economic Dashboard
| INDICATOR | LATEST | PREV | Δ DAY | Δ YTD |
|---|---|---|---|---|
| S&P 500 | 7,337.11 | 7,365.12 | -0.38% | +19.7% |
| Nasdaq Composite | 25,806.20 | 25,838.94 | -0.13% | +24.1% |
| WTI Crude | $94.81 | ~$95 | -0.3% | +31.8% |
| Brent Crude | $100.06 | ~$103 | -1.2% | +26.4% |
| German Factory Orders MoM (Mar) | 5.0% | 1.4% | 5x Consensus | n/a |
| EZ Construction PMI (Apr) | 41.7 | 44.6 | -2.9pts | -8.2pts |
| UK Construction PMI (Apr) | 39.7 | 45.6 | -5.9pts | -11.1pts |
| US Initial Claims | 200K | 190K | Below 205K est. | n/a |
| US Unit Labor Costs QoQ (Q1) | 2.3% | 4.6% | Below 2.6% est. | n/a |
| Brazil IP YoY (Mar) | 4.3% | -0.7% | Beat 3.5% est. | n/a |
| Banxico Rate Decision | 6.50% | 6.75% | -25 bps | -50 bps YTD |
| US Consumer Credit (Mar) | $24.86B | $8.85B | 2x Consensus | n/a |
| Australia Trade Balance (Mar) | -A$1.84B | A$5.03B | Deficit Shock | n/a |
As of close, May 7, 2026. Sources: CNBC Markets, Destatis, Trading Economics, BLS.
German factory orders surge 5.0% as European construction PMIs collapse to crisis levels
German factory orders surged 5.0% MoM in March (consensus 1.0%, prior 1.4%), the strongest reading in years, according to Destatis data via Trading Economics. The five-fold beat reflects defense procurement, front-loaded industrial demand ahead of supply-chain disruptions, and the weak euro boosting export competitiveness. This is the second consecutive month of strong German factory data (February was 1.4%) and stands in stark contrast to the country’s consumer readings: retail collapsed -2.0% MoM (from last week), the ZEW crashed to -17.2, and unemployment rose 20,000 in April.
The construction sector is where the war’s damage is most visible. The eurozone construction PMI fell to 41.7 in April (prior 44.6), with France crashing to 38.1 (prior 38.4), Germany plunging to 42.1 (prior 48.0), and Italy at 44.8 (prior 46.8), according to S&P Global. The UK construction PMI collapsed to 39.7 (consensus 45.8, prior 45.6), a 5.9-point miss that is the worst reading since the pandemic, according to CNBC. Elevated material costs, tight financing (mortgage rates above 6% in the UK), and energy-price uncertainty are crushing the building sector across Europe. EZ retail sales beat marginally at -0.1% MoM (consensus -0.3%) and 1.2% YoY (consensus 1.0%).
Claims at 200,000, unit labor costs below consensus, consumer credit surges $24.86 billion
Initial jobless claims rose to 200,000 for the week ended May 2 (consensus 205,000, prior 190,000 revised), according to the Department of Labor. The 4-week moving average fell to 203,250. Continuing claims dropped to 1.766 million (consensus 1.800 million), the lowest in over two years, according to Trading Economics. Q1 nonfarm productivity rose 0.8% (consensus 0.7%, prior 1.6%), and unit labor costs increased 2.3% (consensus 2.6%, prior 4.6%). The unit labor cost undershoot is dovish for the Fed: wage-driven inflation pressure is easing faster than expected.
Consumer credit surged $24.86 billion in March (consensus $12.50 billion, prior $8.85 billion), according to the Federal Reserve. This is the largest monthly credit expansion since early 2024 and suggests the American consumer is funding spending through borrowing as real wages are eroded by the energy squeeze. The Challenger report showed 83,387 job cuts in April (prior 60,620), with AI cited as the top reason in the tech sector. Construction spending beat at 0.6% MoM (consensus 0.3%, prior -1.9% revised). The NY Fed’s consumer inflation expectations rose to 3.6% from 3.4%, with gas-price expectations plunging 4.3 percentage points to 5.1%. Atlanta Fed GDPNow held at 3.7% for Q2.
S&P 500 pulls back 0.38% from records as markets await Iran’s response and Friday’s payrolls
The S&P 500 fell 0.38% to 7,337.11 after hitting a new intraday ATH during the session, the Nasdaq slipped 0.13% to 25,806.20, and the Dow dropped 313 points to 49,596.97, according to CNBC. Oil regained ground from Wednesday’s 7% crash, with WTI settling at $94.81 (-0.3%) and Brent at $100.06 (-1.2%). Datadog surged 30% on raised full-year guidance ($4.3-4.34 billion, above the $4.09 billion consensus). Whirlpool crashed 21% after earnings and revenue missed, blaming the war for declining consumer confidence. Apple touched an all-time intraday high of $290.33. Iran is expected to respond to the US proposal “as soon as Thursday,” according to CNN.
S&P 500 Q1 earnings are tracking near 25-28% YoY growth, well above the 12% expected at the end of March, according to Edward Jones. Full-year 2026 earnings are now projected to rise 18.7%. The energy sector has seen a nearly 40% upward revision in expected EPS. The S&P 500’s RSI stands near 71.8, above the 70 threshold commonly interpreted as overbought, according to FactSet. Nonfarm payrolls consensus for Friday has dropped to around 60,000 (per Schwab), well below March’s 178,000. Downward revisions to prior months should be closely monitored.
Banxico cuts to 6.50% as Mexico enters recession, Brazil IP beats at 4.3% YoY
Banxico cut its benchmark rate 25 basis points to 6.50% (consensus 6.50%, prior 6.75%), becoming the second LatAm central bank to ease in the past two weeks after the BCB’s surprise cut to 14.50% on April 29. Mexico’s Q1 GDP contracted -0.8% QoQ, retail sales are decelerating (3.1% vs 5.0%), and gross fixed investment fell -4.2% YoY. CPI eased to 4.45% (consensus 4.50%) with core at 4.26%. Mexico’s PPI was flat at 0.0% MoM (prior 1.7%), the clearest sign of pipeline inflation pressure easing.
Brazil’s March industrial production beat at 4.3% YoY (consensus 3.5%, prior -0.7%), the strongest reading in months, according to IBGE. Combined with the BCB’s cut, the PMI crossing into expansion at 52.6, and the services PMI at 52.3, Brazil’s economy is responding to easier monetary conditions faster than expected. Brazil’s trade surplus came in at $10.54 billion (consensus $10.90 billion), and FX flows remained positive at $3.307 billion. Argentina’s industrial production surged 5.0% in March (prior -8.6%), a remarkable reversal. As analyzed in the May 6 global economy briefing, the BCB’s cut is being validated by the data. Australia’s trade balance swung to a deficit of A$1.841 billion (consensus A$4.380 billion surplus), driven by a 14.1% import surge.
What to Watch Today
Friday, May 8, 8:30 AM ET · US Nonfarm Payrolls, April (consensus ~60,000; ADP 109K; JOLTS hiring 3.5%; downward revisions to prior months are the key risk)
Friday, May 8, 8:30 AM ET · US Average Hourly Earnings (wage growth is the critical variable for incoming Fed Chair Warsh)
Friday, May 8, 10:00 AM ET · University of Michigan Consumer Sentiment, May Preliminary (prior 63.8; inflation expectations the focus)
Friday, May 8 · Canada Employment, April (BoC hold at 2.25%; Ivey PMI at 57.7 suggests strength)
Friday, May 8 · Iran’s response to US peace proposal expected (CNN reported “as soon as Thursday”; oil direction depends entirely on this)
Frequently Asked Questions
Why did German factory orders surge 5.0% in March?
German factory orders rose 5.0% month-on-month in March 2026, beating the 1.0% consensus by five times, according to Destatis. The surge was driven by defense procurement acceleration across Europe, front-loaded industrial orders ahead of potential supply-chain disruptions from the Iran war, and the weak euro boosting export competitiveness. This contrasts sharply with Germany’s consumer data, where retail sales collapsed 2.0% and the ZEW sentiment index crashed to -17.2.
Why are construction PMIs collapsing across Europe?
European construction PMIs fell to 41.7 in April, with France at 38.1, the UK at 39.7, Germany at 42.1, and Italy at 44.8. The collapse is driven by elevated material costs from the oil and energy shock, tight financing conditions with mortgage rates above 6%, and demand uncertainty from the war. The UK’s 39.7 reading, a 5.9-point miss versus the 45.8 consensus, is the weakest since the pandemic.
What should investors watch in Friday’s payrolls report?
April nonfarm payrolls consensus is around 60,000, well below March’s 178,000. Key items to monitor include downward revisions to prior months (increasingly common this cycle), average hourly earnings growth (the critical inflation variable for incoming Fed Chair Warsh), and the unemployment rate. ADP’s 109,000 reading and JOLTS hiring at 3.5% suggest the labor market is stronger than the low consensus implies.
Why did Banxico cut rates on May 7, 2026?
Banxico lowered its benchmark rate 25 basis points to 6.50% on May 7, 2026, as expected. Mexico’s economy contracted 0.8% in Q1, retail sales decelerated from 5.0% to 3.1%, and gross fixed investment fell 4.2% year-on-year. CPI eased to 4.45% and PPI was flat month-on-month. This makes Banxico the second LatAm central bank to ease in two weeks, following the BCB’s surprise cut to 14.50%.
How is Brazil’s economy responding to the BCB rate cut?
Brazil’s industrial production beat at 4.3% year-on-year in March (consensus 3.5%), the manufacturing PMI crossed into expansion at 52.6, services PMI rose to 52.3, and FX inflows totaled $3.307 billion. The BCB’s surprise cut to 14.50% from 14.75% on April 29 appears to be validated by improving activity data, though the fiscal picture remains challenging with gross debt-to-GDP at 80.1%.
Updated: 2026-05-08T08:00:00Z by Matt Camenzind
Previously: Global Economy Briefing — May 7, 2026 · Global Economy Briefing — May 6, 2026 · Global Economy Briefing — May 5, 2026 · Sources: Trading Economics · CNBC Markets · Bureau of Labor Statistics · The Rio Times