Wall Street’s main indexes were mixed on Thursday as investors assessed stronger-than-expected GDP data and remained cautious after suffering a tech mauling in the previous session.
Data showed the U.S. economy expanded 2.8% in the second quarter versus estimates of 2%, but inflation subsided, leaving intact expectations of a September rate cut.
“The growth rate was higher than what we were looking for, but the good news is that the economy expanded as consumers spent more as inflation dropped in the second quarter,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
“This is a good sign in terms of the economy.”
Megacap stocks were mixed, after lackluster earnings from Alphabet (GOOGL.O), and Tesla (TSLA.O), pummeled the so-called “Magnificent Seven” group of tech stocks in the previous session. The Nasdaq (.IXIC), and the S&P 500 (.SPX), saw their worst day since 2022 in the selloff.
On Thursday, Nvidia (NVDA.O), Alphabet (GOOGL.O), and Microsoft (MSFT.O), slipped between 0.4% and 0.9%, while Tesla rebounded 2.6% after a 12% slump a day earlier.
Semiconductor stocks also broadly fell, led by a 13% tumble in Teradyne (TER.O), after the chip-testing equipment maker forecast lower-than-expected third-quarter revenue. The semiconductor index (.SOX), lost 1.6%.
While the group of heavyweight stocks has powered the stock market to all-time highs this year, Wednesday’s selloff added weight to fears that these stocks might be over-stretched and in for more turbulence.
“There is so much pull ahead in terms of share prices, earnings forecasts with AI that we are seeing some fatigue setting in,” said Jake Dollarhide, chief executive officer at Longbow Asset Management.
The small-cap Russell 2000 (.RUT), outperformed, rising 0.7% after a 2% slump in the prior session, as investors now see more value in shifting to lagging sectors.
Wall Street’s “fear gauge” (.VIX), eased slightly, but hovered around its highest since April 19.
Investors are awaiting the personal consumption expenditures (PCE) price data, due on Friday, to confirm bets of an early start to the Federal Reserve’s rate cuts after the recent trend of easing inflation and some weakness in the labor market.
Bets of a 25-basis-point cut in September ticked up to nearly 88% from around 78% prior to Thursday’s data, as per CME’s FedWatch Tool.
Market participants are also pricing in at least two rate cuts by December this year, according to LSEG data.
At 9:46 a.m. ET, the Dow Jones Industrial Average (.DJI), was up 111.84 points, or 0.28%, at 39,965.71, the S&P 500 (.SPX), was down 4.15 points, or 0.08%, at 5,422.98, and the Nasdaq Composite (.IXIC), was down 76.93 points, or 0.44%, at 17,265.48.
Among earnings-driven moves, Ford (F.N), slumped 17.2% after the automaker’s second-quarter adjusted profit missed estimates by a wide margin, while American Airlines (AAL.O), rose 4.5%, reversing premarket losses after cutting its annual profit forecast.
Edwards Lifesciences (EW.N), tumbled 23.8%, the biggest decliner on the S&P 500, after missing second-quarter revenue estimates.
Advancing issues outnumbered decliners by a 1.84-to-1 ratio on the NYSE and by a 1.52-to-1 ratio on the Nasdaq.
The S&P index recorded 25 new 52-week highs and 8 new lows, while the Nasdaq recorded 45 new highs and 37 new lows.
