The stock market saw a downturn following a report indicating a slowdown in US economic growth and persistent inflation pressures, dampening recent optimism. Wall Street experienced notable losses, with Facebook’s parent company, Meta Platforms, leading the decline. The S&P 500 fell by 1.3% early Thursday, while the Dow Jones Industrial Average dropped by 503 points, and the Nasdaq composite fell by 2.1%. Treasury yields surged in the bond market after the government reported higher-than-expected inflation levels and a slower-than-anticipated growth rate for the US economy in the first quarter.
Ahead of a heavy schedule of corporate earnings and the release of the government’s initial estimate of first-quarter economic performance, futures for the Dow Jones industrials and the S&P 500 each declined by 0.6%.
Southwest Airlines faced a nearly 8% decline after reporting a $231 million loss in the first quarter and announcing measures to address financial challenges, including limiting hiring and discontinuing service to four airports. Conversely, American Airlines reported a $312 million loss but expressed optimism about returning to profitability in the second quarter, leading to a 5.2% increase in its stock before markets opened on Thursday.
Meta Platforms, the parent company of Facebook and Instagram, saw a significant drop of 15.6% in after-hours trading following lukewarm revenue guidance despite strong first-quarter financial results.
The earnings reports of Google parent Alphabet and Microsoft, two of the “Magnificent Seven” stocks that drove most of last year’s stock market gains, are highly anticipated. The hope is that these companies, along with others, will deliver robust profits to justify their high stock prices and sustain broader market growth.
Despite expectations of a slower but still decent GDP growth rate of 2.2% for the first quarter, concerns about inflation and economic performance persist. The Federal Reserve’s decision to leave interest rates unchanged at its recent meetings reflects confidence in the strength of the economy, further underscoring the importance of corporate earnings in driving stock prices.
Global markets showed mixed performance, with France’s CAC 40 and Germany’s DAX experiencing declines, while Britain’s FTSE 100 rose. In Asia, Japan’s Nikkei 225 and South Korea’s Kospi dropped, but Hong Kong’s Hang Seng and China’s Shanghai Composite gained.
Attention also turned to the Bank of Japan’s monetary policy meeting, with speculation about potential interventions to address yen weakness. In currency trading, the US dollar rose against the Japanese yen, while speculation about potential intervention efforts by Japan continued to circulate.
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