The stock market’s recent rebound hit a roadblock this week as disappointing economic growth and mounting price pressures sent investors into a frenzy. Thursday’s trading session started off on a shaky note as news of slower economic growth and a spike in inflation rattled the markets.
According to the Bureau of Economic Analysis, the initial reading of first-quarter gross domestic product (GDP) came in at a sluggish 1.6% annualized rate, well below economists’ expectations of 2.4%. This marked the slowest rate of growth since the second quarter of 2022. Additionally, the core Personal Consumption Expenditures (PCE) price index, a key measure of inflation, surged 3.7% in Q1, the biggest increase in nearly a year.
While some feared the possibility of stagflation, economists remained cautious in their assessments. Scott Anderson, chief U.S. economist at BMO Capital Markets, noted that the slowdown in consumer spending growth could indicate the Fed’s restrictive monetary policy is working, but the resurgence in inflation suggests more work needs to be done.
The uncertainty surrounding inflation threw the Federal Open Market Committee’s (FOMC) rate-cutting plans into question, with traders now giving just a 29% chance of a rate cut in July. By the end of the trading day, the Dow Jones Industrial Average was down nearly 1%, the S&P 500 lost 0.5%, and the Nasdaq Composite declined 0.6%.
The market was further shaken by Meta Platforms (META), which saw its stock plummet 10.6% after issuing lower-than-expected revenue guidance and higher cost projections. The company’s disappointing outlook wiped out $132 billion in market capitalization, equivalent to the entire value of Lowe’s home improvement chain.
Despite the market turmoil, some analysts see the selloff as a buying opportunity. Jefferies analyst Brent Thill maintained a Buy rating on META, citing the company’s strong revenue growth in Q1. Looking ahead, investors will be closely watching earnings reports from other tech giants like Microsoft and Amazon.com, which could help lift the market back up.
Overall, the stock market’s rollercoaster ride this week serves as a reminder of the delicate balance between economic growth, inflation, and corporate performance in shaping investor sentiment.
