U.S. stocks ended lower on Thursday after data showed that the economy grew at a slower-than-expected pace in the first quarter and persistent inflation, raising concerns over future interest rate cuts. All three major indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) shed 1% or 375.12 points to finish at 38,085.80. The blue chip index was down 1.8% at one point during Thursday’s trading session.
The S&P 500 slid 0.5% or 23.21 points, to close at 5,048.42 points, snapping its three-day winning streak. Communication services and financial stocks were the worst performers on the index.
The Communication Services Select Sector SPDR (XLC) lost 3.6%, while the Financials Select Sector SPDR (XLF) declined 0.6%. Six of the 11 sectors of the benchmark index ended in negative territory.
The tech-heavy Nasdaq declined 0.6% or 100.99 points to end at 15,611.76 points, recording its highest close since Apr 16.
The fear-gauge CBOE Volatility Index (VIX) was down 3.76% to 15.37. Decliners outnumbered advancers on the NYSE by a 2.3-to-1 ratio. On Nasdaq, a 2-to-1 ratio favored declining issues. A total of 10.7 billion shares were traded on Thursday, lower than the last 20-session average of 11.07 billion.
Weak Economic Data Sparks Fears
Stocks tumbled on Thursday as concerns over the economy’s health grew following the release of fresh economic data. Data showed that the U.S. economy grew at a modest 1.6% in the first quarter, its slowest pace in nearly two years.
This was way below the economists’ forecast of a 2.4% expansion. Along with the disappointing economic growth, data also showed that the personal consumption expenditure price index rose 3.4% in the first quarter, a lot higher than the 1.8% recorded in the previous quarter.
This once again raised concerns over rising inflation and whether the Federal Reserve will start cutting rates anytime soon.
The enthusiasm surrounding rate cuts has faded drastically over the past couple of months. Market participants are now pricing in a meager 36 basis points of rate cuts in 2024, sharply down from the 150 basis points expected at the beginning of the year.
The growing fears took a toll on stocks. Caterpillar Inc. (CAT) and International Business Machines Corporation (IBM) were the biggest drag on the Dow, with shares plummeting 7% and 8.3%, respectively.
Caterpillar’s shares tumbled despite the company posting an earnings beat. The company reported first-quarter 2024 adjusted earnings of $5.60 per share, beating the Zacks Consensus Estimate of $5.12 per share. Caterpillar has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mixed Earnings Results Disappoint Investors
The first-quarter earnings season is in full swing with several megacap companies already having reported their quarterly results. It has been a mixed earnings week so far.
Shares of Meta Platforms, Inc. (META) platforms plunged 10.6% on Thursday, leading to a massive selloff in tech stocks after the company issued weak revenue guidance for the second quarter despite beating on earnings in the first quarter.
Meta reported first-quarter earnings of $4.71 per share, beating the Zacks Consensus Estimate of $4.32 per share. Revenues of $36.46 billion surpassed the Zacks Consensus Estimate by 0.48% and rose 27.3% year over year.
Shares of American Airlines Group Inc. (AAL) rose 1.5% despite the company reporting a wider-than-expected loss. American Airlines reported first-quarter 2024 loss of $0.34 per share, wider than the Zacks Consensus Estimate of a loss of $0.28 per share.
Economic Data
The Labor Department reported that jobless claims totaled 207,000 for the week ending Apr 20, decreasing 5,000 from the previous week’s unrevised level of 212,000. The four-week moving average was 213,250, a decrease of 1,250 from the previous week’s unrevised average of 214,500.
Continuing claims came in at 1,781,000, a decrease of 15,000 from the previous week’s revised level of 1,796,000. The 4-week moving average was 1,794,000 a decrease of 7,250 from the previous week’s revised average of 1,801,250.
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