Traders work on the floor of the New York Stock Exchange during afternoon trading on April 9, 2024.
Michael M. Santiago | Getty Images
Stock futures fell sharply Thursday after the latest U.S. economic data showed a sharp slowdown in growth and pointed to persistent inflation.
Futures tied to the Dow Jones Industrial Average fell 450 points, or 1.2%. S&P 500 futures slid 1.3%, and Nasdaq 100 futures dropped 1.7%. Treasury yields also soared, with the benchmark 10-year climbing above 4.7%, its highest level since November.
U.S. gross domestic product expanded 1.6% in the first quarter, the Bureau of Economic Analysis said. Economists polled by Dow Jones forecast GDP growth would come in at 2.4%.
Along with the downbeat growth rate for the quarter, the report showed consumer prices increased at a 3.4% pace, well above the previous quarter’s 1.8% advance. This raised concern over persistent inflation and put into question whether the Federal Reserve will be able to cut rates anytime soon.
“In the short term, the numbers don’t appear to be a green light for either bulls or bears, but if the initial reaction of stock index futures is any indication, the uncertainty is unlikely to ease pressures in a market experiencing its deepest pullback since last year,” said Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley.
Following the GDP print, traders moved down expectations for an easing of Federal Reserve monetary policy. Traders now forecast just one interest rate cut this year, according to the CME FedWatch Tool.
Tech tumble
The lackluster GDP added further pressure to an already-tense market contending with concerns over a pullback in growth among technology earnings.
Meta plunged 15% in premarket trading after the social media giant issued light revenue guidance for the second quarter. That would be the stock’s biggest one-day decline since October 2022. International Business Machines also fell 8% after missing consensus estimates for first-quarter revenue.
“For all of the attention given to generative AI in the past nine months, the failure of Meta to attain its revenue growth projections in Q1 is raising questions about whether the monetization of this technology is as easy as what traders were led to believe by management,” said Thierry Wizman, global FX and rates strategist at Macquarie.
Meta’s report raises concern ahead of other big tech releases. Microsoft and Alphabet are slated to post earnings after the close Thursday.
