Stocks tumbled on Thursday following the release of disappointing U.S. economic data that showed a sharp slowdown in growth and persistent inflation. The Dow Jones Industrial Average dropped 611 points, or 1.6%, with Caterpillar and IBM contributing to the decline. The S&P 500 and Nasdaq Composite also experienced losses. Economists had forecasted a GDP growth rate of 2.4%, but the actual data showed an expansion of only 1.6% in the first quarter, while consumer prices increased at a 3.4% pace, raising concerns about inflation and the potential for Federal Reserve rate cuts.
The lackluster GDP numbers added to existing market tensions, particularly in the technology sector, which had been facing concerns about a pullback in growth. Meta saw a sharp decline of 13% after issuing weak revenue guidance for the second quarter, while IBM fell by 8% after missing revenue estimates for Q1. This raised questions about the monetization of generative AI technology. Ahead of Microsoft and Alphabet’s earnings reports, the market was already feeling the pressure of tech earnings and uncertain economic indicators.
The Dow plummeted almost 700 points early Thursday, marking its worst day of the year so far. IBM and Caterpillar led the index lower, along with other major tech names like Microsoft and Amazon, which all showed losses on the back of disappointing earnings. Meta Platforms faced its worst day since October 2022, with shares plunging due to a revenue guidance miss. The overall market sentiment was negative, with the vast majority of NYSE-listed stocks trading lower as a reaction to the GDP report and tech earnings outcomes.
Investors and analysts expressed concerns over the GDP report, with one investor describing it as the “worst of both worlds,” pointing to slowing economic growth and persistent inflationary pressures. The data raised the stakes ahead of the release of the personal consumption expenditures report, which is closely watched as the Fed’s preferred inflation measure. The market was hoping for signs of improvement in pricing pressures after the March consumer inflation report came in higher than expected. The disappointing GDP numbers were seen as a signal of potential trouble for the equity market.
Stocks opened lower on Thursday as the GDP data indicated signs of slowing economic growth. The Dow Jones Industrial Average pulled back 500 points, the S&P 500 dropped 1.4%, and the Nasdaq Composite lost 2.3%. The market reaction reflected concerns about the impact of the GDP slowdown on future rate decisions by the Federal Reserve. Despite the expectations of a potential rate cut due to slowing economic growth, rising prices shown in the GDP report could cause the central bank to hold rates steady until inflation recedes. The GDP data weighed on stock futures before the opening bell, adding to the overall negative sentiment in the market.
