NEW YORK (AP) — Worrying potentially toxic cocktail Stubbornly high inflation and a weak economy combined to send U.S. stocks lower on Thursday. The market was also hit by a sharp decline in the parent company of Facebook, one of the most influential stocks on Wall Street.
The S&P 500 fell 0.5%, paring some of its gains from a big winning week. In the morning, the stock had fallen by 1.6%, and it looked as though it was headed for an even worse decline.
The Dow Jones Industrial Average fell 375 points, or 1%, after dropping 700 points earlier. The Nasdaq Composite fell 0.6%.
meta platformThe company, which operates Facebook and Instagram, fell 10.6% even though it reported profit for its latest quarter that beat analysts’ expectations. Investors instead focused on Meta’s promised massive investment in artificial intelligence. The AI created wall street frenzyBut Meta also provided a projected range for future earnings, with the midpoint coming in below analysts’ expectations, leading to increased spending.
Expectations for Meta, like other “Magnificent Seven” stocks, were high. brought most of the stock market profits last year. A high bar needs to be reached to justify the high stock price.
The overall US stock market felt further upward pressure on US bond yields after disappointing US economic data. The report tops the S&P 500 this year by saying the economy can avoid a deep recession and support strong corporate profits, even if high inflation takes time to be fully brought under control. It shattered the core expectations that had been raised over the years.
This is what Wall Street calls a “soft landing” scenario, and there have been recent hopes for a “no-landing,” in which the economy avoids recession altogether.
But Thursday’s report showed U.S. economic growth slowed to 1.6% in the first three months of this year from an annual rate of 3.4% at the end of 2023.
It was weaker than expected and that alone would have been disappointing. Making matters worse for financial markets, the report also said that inflation in the past three months was higher than economists expected. That could tie the Fed’s hands, which typically cut interest rates to revitalize a sluggish economy.
Thursday’s economic data is likely to be revised several times as the U.S. government tweaks the numbers. But the weaker-than-expected growth and higher-than-expected inflation is “a bit of a blow for people hoping for a ‘no-landing’ scenario,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“It’s too early to say the Fed has failed, as things can change significantly from quarter to quarter, but this doesn’t help their cause.”
Beneath the surface, the economic report may not have been as bad as initially thought. Much of the slowdown was due to increased imports and other factors that can fluctuate sharply and rapidly. U.S. household spending, the main driver of the economy, remained relatively steady.
The concerns raised by the report were allayed and the market was able to pare its morning losses, but the threat is not gone.
U.S. Treasury yields remained elevated as traders refrained from betting on the Federal Reserve cutting interest rates this year.
The yield on the 10-year U.S. Treasury rose to 4.70% from 4.66% just before the report, and from 4.65% late Wednesday.
Traders are primarily betting that the Fed will cut interest rates once or twice this year, according to data from CME Group.They entered this year with predictions. 6 or more.a string of report will be shown this year inflation Those hopes were dashed as conditions continued to be hotter than forecast.
Fed officials said: It is possible to maintain the main interest rate High interest rates slow the overall economy and negatively impact investment prices, while rate cuts could lead to a reacceleration of inflation.
This will put more pressure on companies to achieve greater profits.
Southwest Airlines fell 7% after the airline reported First quarter results were worse than analysts expected. Chief Executive Officer Robert Jordan said the company was taking measures such as hiring restrictions to “address underperformance” and deal with delays in the delivery of new planes from Boeing Co. .
Textron fell 9.7% after the maker of Bell Helicopter and Cessna jets reported lower-than-expected profits and revenue. Caterpillar fell 7% despite reporting better-than-expected profits. Sales for the latest quarter were below analysts’ expectations.
The winner was Chipotle Mexican Grill, which rose 6.3% after reporting stronger profit and revenue than analysts expected. Stewed beef barbacoa and chicken al pastor Generated more sales.
Overall, the S&P 500 fell 23.21 points to 5,048.42. The Dow Jones Industrial Average fell $375.12 to $38,085.80, and the Nasdaq Composite Index fell $100.99 to $15,611.76.
In overseas stock markets, Japan’s Nikkei Stock Average fell 2.2% as investors waited to see if the Bank of Japan would move to support the weaker yen. In other parts of Asia and Europe, the index was mixed.
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AP Business writers Yuri Kageyama and Matt Ott contributed.
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This article has been corrected to reflect S&P 500 closing price levels. The closing price was 5,048.42, not 4,048.42.