(Alliance News) - Stocks in New York fell back after data showed an unwelcome combination of slowing growth alongside stubborn inflation.
On Wall Street, the Dow Jones Industrial Average closed down 375.12 points, 1.0%, to 38,085.80. The S&P 500 closed down 23.21 points, 0.5%, at 5,048.42 and the Nasdaq Composite closed down 100.99 points, 0.6%, to 15,611.76.
US economic growth slowed in the first three months of the year, coming in weaker than expected, though inflation pressure picked up, according to numbers from the Bureau of Economic Analysis.
The BEA said US gross domestic product grew 1.6% quarter-on-quarter on an annualised basis in the three months to March 31. Growth eased from a 3.4% rally in the final three months of 2023.
The latest reading fell short of FXStreet cited consensus, which had predicted a 2.5% climb.
"Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending. These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated," the BEA said.
Year-on-year, US GDP grew 3.0% in the first-quarter, easing slightly from a 3.1% rise in the final three months of 2023.
The personal consumption expenditures index grew 3.4% quarter-on-quarter, picking up speed from a 1.8% rise in the final quarter of last year, and further stoking inflation worries.
The growth in the core PCE index picked up to 3.7% on-quarter at the start of the year, accelerating from 2.0% in the final three months of 2023. The core PCE reading excludes food and energy, and it is the Federal Reserve's preferred inflationary gauge.
The monthly PCE reading for March is released at 1330 BST on Friday.
Kathleen Brooks, research director at XTB: "This could bring the sceptre of stagflation into view, which is negative for stocks and for market sentiment."
"Friday’s core PCE report for March is likely to be higher than the 2.6% expected, which could also erode market sentiment. American exceptionalism had been focused in growth in recent months, however, now that it looks like growth is slowing, America looks exceptional at generating inflation, which is likely to cause a headache for the Fed ahead of its meeting next week."
ING's James Knightley said the figures imply upside risks to "tomorrow's key monthly core PCE deflator and makes a near-term rate cut even less likely."
"There is next to no chance of a rate cut before September," he remarked.
The pound traded at USD1.2514 late on Thursday, up from USD1.2463 at the New York equities close on Wednesday. The euro traded at USD1.0732, up from USD1.0702. Versus the yen, the greenback rose to JPY155.62 from JPY155.23.
Meta Platforms endured a torrid day, falling 11%.
After the market close Wednesday, Meta signalled higher-than-expected costs lay ahead as it ploughs more cash into artificial intelligence after reporting another bumper quarter.
The owner of Facebook and Instagram reported revenue in the first three months of 2024 leapt 27% to USD36.46 billion from USD28.65 billion the year prior.
Net income more than doubled to USD12.37 billion from USD5.71 billion, while diluted earnings per share climbed to USD4.71 from USD2.20.
Looking ahead, It increased guidance for full-year total expenses to a range of USD96 to USD99 billion, updated from prior outlook of USD94 to USD99 billion due to higher infrastructure and legal costs.
AJ Bell's Russ Mould noted the big increase in capex spending awakened previous concerns about a "lack of discipline" from Chief Executive Mark Zuckerburg.
"Zuckerburg has form for spending significant sums without the promise of making any money in the short term – see the money allocated to the metaverse. Looking to come out on top in an AI arms race falls into a similar category with an admission that a lot will need to be spent before generating revenue."
On another bumper day of earnings, Bristol-Myers Squibb tumbled 8.5% as it reported a swing to a first-quarter loss on charges related to its acquisition of Karuna.
The Princeton, New Jersey-based pharmaceutical company said revenue in the three months to March 31 increased 4.7% to USD11.87 billion from USD11.34 billion a year prior and beating consensus of USD11.46 billion.
It swung to a net loss of USD11.91 billion, however, from profit of USD2.27 billion 12 months prior. Total expenses jumped to USD23.38 billion, from USD8.57 billion a year prior.
IBM fell 8.2% despite reporting a much improved financial picture in the first quarter of 2024.
The Armonk, New York-based software, consultancy services, and computer infrastructure provider said net income in the first three months of 2024 rose to USD1.61 billion from USD927 million the year prior.
This came as revenue edged higher to USD14.46 billion up from USD14.25 billion.
Software revenue rose 5%, Consulting revenue was flat, and Infrastructure revenue fell 1%.
Bank of America said the share price weakness was in part to also partly due to "weakness in Consulting which offset stronger performance in Software and Infrastructure."
Elsewhere, Caterpillar fell 7.0%, Comcast fell 5.8% but Union Pacific fared better, rising 4.5%.
In London on Thursday, the FTSE 100 ended up 0.5%. Frankfurt's DAX 40 closed down 1.0% and the CAC 40 in Paris ended down 0.9%.
In Asia on Thursday, the Nikkei 225 index in Tokyo was down 2.2%. In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong was up 0.4%. In Sydney, financial markets were closed for Anzac Day.
Brent oil rose to USD89.18 a barrel late Thursday, compared with USD88.09 on Wednesday. West Texas Intermediate rose to USD83.76 a barrel from USD82.87. Gold climbed to USD2,335.73 an ounce from USD2,319.29.
The New York corporate calendar on Friday sees first quarter results from Chevron, AbbVie and ExxonMobil.
The global economic diary sees US personal consumption expenditures index figures at 1330 GMT.
By Jeremy Cutler, Alliance News reporter
Comments and questions to newsroom@alliancenews.com
Copyright 2024, Alliance News
NEW YORK MARKET CLOSE: Stocks ebb on stagflation fears as growth slows
(Alliance News) - Stocks in New York fell back after data showed an unwelcome combination of slowing growth alongside stubborn inflation.
On Wall Street, the Dow Jones Industrial Average closed down 375.12 points, 1.0%, to 38,085.80. The S&P 500 closed down 23.21 points, 0.5%, at 5,048.42 and the Nasdaq Composite closed down 100.99 points, 0.6%, to 15,611.76.
US economic growth slowed in the first three months of the year, coming in weaker than expected, though inflation pressure picked up, according to numbers from the Bureau of Economic Analysis.
The BEA said US gross domestic product grew 1.6% quarter-on-quarter on an annualised basis in the three months to March 31. Growth eased from a 3.4% rally in the final three months of 2023.
The latest reading fell short of FXStreet cited consensus, which had predicted a 2.5% climb.
"Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending. These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated," the BEA said.
Year-on-year, US GDP grew 3.0% in the first-quarter, easing slightly from a 3.1% rise in the final three months of 2023.
The personal consumption expenditures index grew 3.4% quarter-on-quarter, picking up speed from a 1.8% rise in the final quarter of last year, and further stoking inflation worries.
The growth in the core PCE index picked up to 3.7% on-quarter at the start of the year, accelerating from 2.0% in the final three months of 2023. The core PCE reading excludes food and energy, and it is the Federal Reserve's preferred inflationary gauge.
The monthly PCE reading for March is released at 1330 BST on Friday.
Kathleen Brooks, research director at XTB: "This could bring the sceptre of stagflation into view, which is negative for stocks and for market sentiment."
"Friday’s core PCE report for March is likely to be higher than the 2.6% expected, which could also erode market sentiment. American exceptionalism had been focused in growth in recent months, however, now that it looks like growth is slowing, America looks exceptional at generating inflation, which is likely to cause a headache for the Fed ahead of its meeting next week."
ING's James Knightley said the figures imply upside risks to "tomorrow's key monthly core PCE deflator and makes a near-term rate cut even less likely."
"There is next to no chance of a rate cut before September," he remarked.
The pound traded at USD1.2514 late on Thursday, up from USD1.2463 at the New York equities close on Wednesday. The euro traded at USD1.0732, up from USD1.0702. Versus the yen, the greenback rose to JPY155.62 from JPY155.23.
Meta Platforms endured a torrid day, falling 11%.
After the market close Wednesday, Meta signalled higher-than-expected costs lay ahead as it ploughs more cash into artificial intelligence after reporting another bumper quarter.
The owner of Facebook and Instagram reported revenue in the first three months of 2024 leapt 27% to USD36.46 billion from USD28.65 billion the year prior.
Net income more than doubled to USD12.37 billion from USD5.71 billion, while diluted earnings per share climbed to USD4.71 from USD2.20.
Looking ahead, It increased guidance for full-year total expenses to a range of USD96 to USD99 billion, updated from prior outlook of USD94 to USD99 billion due to higher infrastructure and legal costs.
AJ Bell's Russ Mould noted the big increase in capex spending awakened previous concerns about a "lack of discipline" from Chief Executive Mark Zuckerburg.
"Zuckerburg has form for spending significant sums without the promise of making any money in the short term – see the money allocated to the metaverse. Looking to come out on top in an AI arms race falls into a similar category with an admission that a lot will need to be spent before generating revenue."
On another bumper day of earnings, Bristol-Myers Squibb tumbled 8.5% as it reported a swing to a first-quarter loss on charges related to its acquisition of Karuna.
The Princeton, New Jersey-based pharmaceutical company said revenue in the three months to March 31 increased 4.7% to USD11.87 billion from USD11.34 billion a year prior and beating consensus of USD11.46 billion.
It swung to a net loss of USD11.91 billion, however, from profit of USD2.27 billion 12 months prior. Total expenses jumped to USD23.38 billion, from USD8.57 billion a year prior.
IBM fell 8.2% despite reporting a much improved financial picture in the first quarter of 2024.
The Armonk, New York-based software, consultancy services, and computer infrastructure provider said net income in the first three months of 2024 rose to USD1.61 billion from USD927 million the year prior.
This came as revenue edged higher to USD14.46 billion up from USD14.25 billion.
Software revenue rose 5%, Consulting revenue was flat, and Infrastructure revenue fell 1%.
Bank of America said the share price weakness was in part to also partly due to "weakness in Consulting which offset stronger performance in Software and Infrastructure."
Elsewhere, Caterpillar fell 7.0%, Comcast fell 5.8% but Union Pacific fared better, rising 4.5%.
In London on Thursday, the FTSE 100 ended up 0.5%. Frankfurt's DAX 40 closed down 1.0% and the CAC 40 in Paris ended down 0.9%.
In Asia on Thursday, the Nikkei 225 index in Tokyo was down 2.2%. In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong was up 0.4%. In Sydney, financial markets were closed for Anzac Day.
Brent oil rose to USD89.18 a barrel late Thursday, compared with USD88.09 on Wednesday. West Texas Intermediate rose to USD83.76 a barrel from USD82.87. Gold climbed to USD2,335.73 an ounce from USD2,319.29.
The New York corporate calendar on Friday sees first quarter results from Chevron, AbbVie and ExxonMobil.
The global economic diary sees US personal consumption expenditures index figures at 1330 GMT.
By Jeremy Cutler, Alliance News reporter
Comments and questions to newsroom@alliancenews.com
Copyright 2024, Alliance News