S&P 500 and Nasdaq Drop 1% After GDP Report Raised Inflation and Growth Worries

Barry Adams
25 Apr, 2024
New York City

Stocks on Wall Street faced headwinds, Treasury yields edged higher, and the dollar retained an upward bias in Thursday's trading. 

The S&P 500 index and the Nasdaq Composite fell more than 0.6% in early trading as investors negatively reacted to the latest GDP growth data. 

First quarter GDP growth fell short of expectations due to lower investment in inventories, the U.S. Bureau of Economic Analysis reported Thursday. 

GDP in the first quarter expanded at an annual pace of 1.6%, sharply lower than the 3.4% annual rate in the final quarter of 2023. 

Increases in consumer and government spending and residential and non-residential fixed investment were offset by a decrease in private inventory investment. 

Additionally, core PCE prices rose 3.7%, suggesting prices are still rising at faster than the Fed's target rate of 2%. 

Moreover, investors were disappointed with Meta Platform's second quarter revenue outlook and IBM's revenue growth in the first quarter. 

Earnings dominated market sentiment, and Chipotle Mexican Grill and Honeywell advanced after reporting strong earnings. 

Southwest declined after the regional airline lowered its growth outlook and American Airlines reported a quarterly loss, but the company's current quarter outlook supported the market enthusiasm. 

IBM declined more than 7% after the company's revenues fell short of market expectations. 

 

U.S. indexes and yields

The S&P 500 index decreased 0.6% to 5,048.15, and the Nasdaq Composite fell 0.9% to 15,636,09. 

The yield on 2-year Treasury notes edged lower to 4.93%, 10-year Treasury notes inched down to 4.65%, and 30-year Treasury bonds edged lower to 4.79%.

WTI crude oil decreased $0.32 to $83.02 a barrel, and natural gas prices increased 0.1 cent to $1.65 a thermal unit.

Gold decreased by $12.30 to $2,328.34 an ounce, and silver fell 21 cents to $27.40. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 106.62.

 

U.S. Stock Movers

Southwest Airlines plunged 7% to $27.0 after the regional airline reported a wider-than-expected loss in the first quarter, and the company said it anticipates fewer plane deliveries from Boeing. 

Revenue in the first quarter increased 11% to $6.3 billion, net loss expanded to $231 million from $159 million, and diluted loss per share increased to 39 cents from 27 cents a year ago. 

The airline said it expects to receive a total of 20 Boeing 737 Max 8 airplanes compared to its previous estimate of 46 planes in 2024, and the company plans to delay retiring some of its older planes and look for ways to cut costs. 

American Airlines Group rose 5.2% to $14.63 after the company reported better-than-expected quarterly results. 

Revenue in the first quarter increased 3.1% to $12.6 billion from $12.2 billion; the company swung to a net loss of $312 million compared to a profit of $10 million; and diluted earnings per share were a loss of 48 cents compared to a profit of 2 cents. 

The company said it lowered its debt by $950 million in the first quarter, and it is on track to lower its debt by $15 billion by 2025. 

The company estimated its adjusted diluted earnings per share for the second quarter between $1.15 and $1.45 and for the full year between $2.25 and $3.25. 

Meta Platforms plunged 14.5% to $421.80 after the social networking site operator projected weaker-than-estimated revenue. 

Revenue in the first quarter increased 27% to $36.5 billion from $28.6 billion, net income rose 117% to $12.4 billion, and diluted earnings per share advanced to $4.71 from $2.20 a year ago. 

In the quarter, the company repurchased $14.64 billion of its common stock and paid $1.27 billion in dividends. 

The company guided second-quarter revenue to range between $36.5 billion and $39 billion and revised its full-year revenue to a range between $96 billion and $99 billion compared to the previous estimate of $94 billion and $99 billion.