Wall Street’s main indexes are mixed as investors assess stronger-than-expected GDP data and remain cautious after suffering a tech mauling in the previous session.
Data showed the US economy expanded 2.8 per cent in the second quarter versus estimates of two per cent, 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 lacklustre earnings from Alphabet and Tesla pummeled the so-called “Magnificent Seven” group of tech stocks in the previous session. The Nasdaq and the S&P 500 saw their worst day since 2022 in the selloff.
On Thursday, Nvidia, Alphabet and Microsoft slipped between 0.4 per cent and 0.9 per cent, while Tesla rebounded 2.6 per cent after a 12 per cent slump a day earlier.
Semiconductor stocks also broadly fell, led by a 13 per cent tumble in Teradyne after the chip-testing equipment maker forecast lower-than-expected third-quarter revenue. The semiconductor index lost 1.6 per cent.
While the group of heavyweight stocks has powered the stock market to all-time highs this year, Wednesday’s sell-off 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 outperformed, rising 0.7 per cent after a two per cent slump in the prior session, as investors now see more value in shifting to lagging sectors.
Wall Street’s “fear gauge” 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 labour market.
Bets of a 25-basis-point cut in September ticked up to nearly 88 per cent from around 78 per cent 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.
In early trading on Thursday, the Dow Jones Industrial Average was up 111.84 points, or 0.28 per cent, at 39,965.71, the S&P 500 was down 4.15 points, or 0.08 per cent, at 5,422.98, and the Nasdaq Composite was down 76.93 points, or 0.44 per cent, at 17,265.48.
Among earnings-driven moves, Ford slumped 17.2 per cent after the automaker’s second-quarter adjusted profit missed estimates by a wide margin, while American Airlines rose 4.5 per cent, reversing premarket losses after cutting its annual profit forecast.
Edwards Lifesciences tumbled 23.8 per cent, 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 eight new lows, while the Nasdaq recorded 45 new highs and 37 new lows.