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US stocks slumped after the release of the first quarter GDP report on Thursday.
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Economic growth slowed to 1.6% in the first three months of the year, well below expectations.
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Commentators pointed out that the data was still strong for the most part, but inflation was problematic.
Stocks fell on Thursday, with the Dow Jones Industrial Average losing 375 points, as the market welcomed weaker-than-expected economic data.
Growth slowed but inflation remained high last quarter, a discouraging sign for traders watching for signs of an imminent rate cut by the Federal Reserve. Slowing growth and high inflation are a difficult scenario for the economy and have led to “stagflation” in previous periods, such as the 1970s.
Still, several banks noted that the data was still optimistic beneath the surface. Barclays and Bank of America both noted that demand still appears to be solid, as evidenced by domestic sales, which were 2.8% in the quarter.
However, inflation was a nasty surprise, and the situation could be further complicated by Friday’s report on personal consumption expenditures, the Fed’s preferred measure of inflation. Analysts at Bank of America said they forecast upward revisions for PCE in January and February, rather than a big surprise increase in the March numbers.
“The economy is likely to slow further in the following quarters as consumer spending is likely to come to an end. Savings rates are falling as stubborn inflation puts more pressure on consumers,” said Jeffrey Roach, chief economist at LPL Financial. “We should expect inflation to ease later this year as aggregate demand weakens, although the path to the Fed’s 2 percent target remains a long way off.”
The 10-year Treasury note rose five basis points to 4.704%.
Meta crashed on Thursday, helping drag down the entire tech sector. The social media company gave disappointing guidance after reporting earnings that beat estimates. Markets await results after the closing bell from Microsoft and Google parent Alphabet.
Here’s where the US indices stood at the closing bell at 4 p.m. on Thursday:
Here’s what else is going on:
For commodities, bonds and crypto:
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West Texas Intermediate crude rose 1% to $83.75 a barrel. Brent crude, the international benchmark, rose 1.3% to 89.18 a barrel.
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Gold rose 0.4% to $2,347.70 an ounce.
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The 10-year Treasury yield rose five basis points to 4.704%.
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Bitcoin rose to $64,586.
Read the original article on Business Insider