(Bloomberg) – US stocks were gripped by volatility on Thursday as investors grappled with losses from big tech companies, while new data showed the US economy rebounded in the third quarter.
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The S&P 500 rose after struggling for direction early in the session. The Nasdaq 100 fell. Tech losses weighed on shares, with Meta Platforms Inc. plummeting as much as 25% as at least three investment banks downgraded the stock after disappointing earnings.
The dollar pared gains after data showed US gross domestic product rose for the first time this year. Treasury yields fell, with the 10-year rate slipping below 4% after oscillating earlier in the session.
“On the one hand, it’s good to see the economy continues to grow, and that should bode well for the stock market,” said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance. “However, given that we are in the middle of an inflationary battle, the Federal Reserve will likely feel that it needs to remain aggressive in its rate hikes.”
A decline in services and manufacturing and slower new home sales showed that the Fed’s efforts to cool the economy appear to be bearing some fruit. Still, economists expect the Fed to hike three-quarters of a percentage point for the fourth straight session at next week’s meeting.
A strong GDP read could argue for another jumbo rate hike in December, although some investors expect the Fed to slow its pace of tightening after its November meeting, Zaccarelli said.
Other opinions on the GDP data:
Steve Sosnick, chief strategist at Interactive Brokers
“Today’s data doesn’t appear to be enough to dissuade the FOMC from doing anything unexpected at next week’s meeting. The GDP data urges the “recession ahead” narrative, meaning all eyes must be on inflationary trends for now.”
The story goes on
Richard Flynn, Managing Director of Charles Schwab UK
“Investors may be relieved by today’s GDP numbers, which beat expectations. This announcement comes on the heels of strong September employment data showing that the labor market remains strong in terms of net job creation despite some stress breaks beneath the surface. That has helped boost consumer spending; The downside is that credit card debt has risen and savings rates have fallen due to still-hot inflation.”
Stan Shipley, Economist at Evercore ISI
“Demand for the economy was fine as real GDP grew a better-than-expected +2.6% in Q3. The GDP deflator rose less than expected by +4.1%. The inflation story is probably the most influential part of this publication. Attention will now shift to the 4Q activity. Despite news of layoffs, initial jobless claims remained low. Currently, the fixed income market is discounting the risk of a short-term recession.”
As expected, the European Central Bank had previously raised its key interest rate by 75 basis points and announced further tightening. The Stoxx Europe 600 index fell after the decision, while the euro fell.
Important events this week:
Bank of Japan policy decision, Friday
US Personal Income, Personal Spending, Pending Home Sales, University of Michigan Consumer Sentiment, Friday
Some of the key movements in the markets:
Stocks
The S&P 500 was up 0.5% as of 10:15 a.m. New York time
The Nasdaq 100 fell 0.4%
The Dow Jones Industrial Average rose 1.5%
The Stoxx Europe 600 fell 0.3%
The MSCI World Index has hardly changed
currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.5% to $1.0031
The British pound was little changed at $1.1619
The Japanese yen rose 0.4% to 145.85 per dollar
cryptocurrencies
Bitcoin fell 0.3% to $20,687.63
Ether was up 0.5% to $1,561.13
Bind
The 10-year government bond yield fell four basis points to 3.97%
The 10-year German government bond yield fell 9 basis points to 2.02%
The 10-year UK government bond yield fell four basis points to 3.53%
raw materials
West Texas Intermediate crude rose 1.1% to $88.86 a barrel
Gold futures fell 0.2% to $1,665.70 an ounce
–Assisted by Robert Brand, Elaine Chen and Emily Graffeo.
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