Stocks fall as GDP report spreads rate-cut gloom
NEW YORK – Wall Street stocks closed lower on Thursday as markets were stunned by data showing slowerthan-expected U.S. economic growth and persistent inflation, coupled with a sell-off in large cap stocks triggered by disappointing results from Meta Platforms.
Data on Thursday showed that the U.S. economy grew at its slowest pace in nearly two years in the first quarter while inflation accelerated, dampening hopes that the Federal Reserve would begin cutting interest rates this year.
Disappointing results from Meta, whose shares plunged, also weighed on market sentiment. “The GDP numbers definitely put a ding in the paradigm that markets were hanging on to for equities in terms of high growth; and if you don’t have high growth, that will translate to lower-than-expected earnings,” said James St. Aubin, chief investment officer at Sierra Mutual Funds in California.
The Dow Jones Industrial Average fell 375.12 points, or 0.98%, to 38,085.80; the S&P 500 lost 23.21 points, or 0.46%, to 5,048.42; and the Nasdaq Composite lost 100.99 points, or 0.64%, to 15,611.76.
Money markets are pricing in about 36 basis points of rate cuts from the Fed this year, down from about 150 seen at the start of the year, according to LSEG data.
Separately, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to still tight labor market conditions. The March Personal Consumption expenditures index, the Fed’s preferred inflation gauge, is due on Friday.
“The double whammy was also the inflation number that came in stronger than expected so there wasn’t really a silver lining in that report; it’s still positive in absolute terms, but relative to high expectations it was disappointing,” St. Aubin added.
Alphabet announced its first-ever dividend on Thursday and a $70 billion stock buyback, news cheered by investors who sent the stock surging more than 13% after the bell.
The Google parent is returning capital while spending billions of dollars on data centers to catch up with rivals on generative artificial intelligence. The dividend will be 20 cents per share.
Alphabet shares, which had gained more than 13% this year, were trading down nearly 2% on Thursday before the release of first-quarter results. The after-market surge increased Alphabet’s market value by around $250 billion.
Microsoft shares, likewise,were advancing in extended-hours trading after the company reported quarterly results that beat Wall Street estimates.
International Business Machines fell after it announced a $6.4 billion deal to buy HashiCorp alongside its first-quarter results, in which revenue missed estimates.
Southwest Airlines slid as the carrier slashed its projections for new aircraft deliveries from Boeing in 2024 for the third time.
Caterpillar lost ground after it cut second quarter sales forecasts as demand for its construction equipment eases from last year’s boom.
Rising gold prices helped Newmont, the world’s largest bullion miner, to report first quarter profit that beat estimates. Its shares closed higher.
Streaming device maker Roku beat Wall Street estimates for quarterly revenue and forecast second-quarter sales above estimates on Thursday, buoyed by strong ad sales and the ongoing shift to streaming from cable TV. Shares of the company were flitting between gains and losses in volatile trading after the bell. They were last up about 2%.