Stocks sink after weak GDP data, Meta's miss
Stock investors kicked into selling mode after the U.S. economy posted subpar growth in the first quarter.
The Dow Jones Industrial Average fell by triple digits, but clawed back from a 600+ point drop early afternoon. The S&P 500 and tech-heavy Nasdaq Composite also remained off just under 1%.
IBM, Caterpillar and Microsoft – which reports earnings after the close of trading – paced the Dow's steep drop, while Merck, United Health and Walmart rose. Google parent Alphabet and Intel will also report results later today.
As stocks tumbled, bonds rose with the yield on the 10-year Treasury touching 4.076%.
"Treasury yields are soaring to their loftiest levels of the year on the back of this morning’s GDP report, which depicted slowing economic growth amidst accelerating price pressures. The stagflationary combination is particularly troublesome for stocks, whose fundamental prospects are generally driven by a robust economy while their relative valuations are tied to rates" wrote José Torres, Senior Economist at Interactive Brokers in a note to clients.
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Mark Zuckerberg's Meta sank after weaker-than-expected revenue coupled with rising spending on AI that could push expenses near $100 billion, the company disclosed on Wednesday. The stock is on pace for the worst percentage drop since October 27, 2022 when it fell over 24%, as tracked by Dow Jones Market Data Group.
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The Dow's drop pushes it further away from its record close of 39,807 reached in late March 2024.
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Gross domestic product for 2024, so far, rose by 1.6% according to the Commerce Department, falling short of the 2.4% expected by economists. Although this is the seventh straight quarter of growth, it trails the 3.4% rate for the fourth quarter of 2023.
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Gains in consumer spending were muted by "decreases in motor vehicles and parts as well as gasoline and other energy goods," the Commerce Department said.
Gold, which is hovering near an all-time high, ticked higher and oil, which is trading around the $82 per barrel level, remained marginally lower.
In cryptocurrencies, Bitcoin was marginally lower, holding near the $63,000 level. So far this year it has gained over 50% outpacing the S&P's 5% rise.