The Dow Jones Industrial Average surged Thursday after new data showed the economy grew faster than expected and suggested inflation was waning.
The Dow gained 474 points (1.5%), retaining most of its early gain of 559 points. The S&P 500 rose 0.4% while the Nasdaq fell 0.4% after briefly turning positive.
US GDP grew at an annualized pace of 2.6% over the period against Dow Jones estimates of 2.3% growth. The report, a positive growth first quarter of 2022, allayed investor fears of a recession.
In addition to showing stronger-than-expected growth, the GDP report provided at least some good news on inflation. The chain-weighted price index, a measure of the cost of living adjusted to reflect changes in consumer behavior, rose 4.1% in the quarter, well below estimates of 5.3%. Headline inflation also rose 4.2%, down from 7.3%, according to the gauge used by the Federal Reserve.
Cliff Hodge, chief investment officer at Cornerstone Wealth, is looking for data to show inflation is declining and the Fed may ease rate hikes after its November meeting. It gave hope to market observers, he said.
“This morning’s GDP release was a Goldilocks number for risk assets,” Hodge said, noting the price index data. “This is another sign that the worst of inflation may be past.” said.
The tech sector continued its recent woes, pushing the Nasdaq down as Facebook’s parent company Facebook’s stock plunged 24% after weak fourth-quarter forecasts and disappointing third-quarter results. The company also said it will lose more money next year as it builds out the metaverse. The report caused several analysts to lower the stock price.
Traders also read through earnings reports from other companies. Shares of Comcast and McDonald’s each rose 8% and he received better-than-expected earnings reports ahead of Bell, up 2.9%. Tobacco company Altria Group fell 1.7% as earnings per share and earnings fell below expectations.
Honeywell and Merck’s strong third-quarter results also help show that the Nasdaq is struggling with weaker earnings, according to Dan I, chief investment officer at Fort Pitt Capital Group. I got
“It kind of drives the divergence we see between the Dow, which is doing very well today, and the Nasdaq, which is being dragged into the meta,” he said.
Big tech earnings continued on Thursday with results from Amazon and Apple.
Stocks emerged from a mixed session on Wednesday, with the S&P 500 and Nasdaq Composite falling for the first time in four days and the Dow closing slightly higher.
The Dow and S&P are up more than 2%, the Nasdaq is up about 1%, and all major averages remain in positive territory this week. The Dow Jones Industrial Average has maintained its upward pace for four straight weeks since his five-week winning streak ended in November 2021.