Wall Street drops on US recession concerns
US stock indexes have fallen, weighed down by gloomy forecasts from Meta and Qualcomm, while an early reading showed the US economy contracted again in the second quarter adding to fears the economy is already in recession.
Fears of runaway inflation and aggressive monetary policy tightening biting into economic growth have spooked markets after gross domestic product fell at a 0.9 per cent annualised rate last quarter, the Commerce Department said in its advance GDP estimate.
A Reuters survey of economists showed GDP growth likely rebounded at a 0.5 per cent annualised rate last quarter.
"Today's reading only adds fuel to the fire that we are in or entering a recession," said Mike Loewengart, managing director at E*Trade from Morgan Stanley.
"While it is certainly on the negative side of estimates, keep in mind that a 1.0 per cent decrease is relatively small and supports the idea that any recessionary environment will be mild."
Two consecutive quarters of declines in growth are traditionally considered a recession but the private research group that is the official arbiter of US recessions looks at a broad range of indicators instead, including jobs and spending.
Worries of a recession hit Meta Platforms Inc shares, which fell 7.6 per cent after posting its first-ever quarterly drop in revenue.
Qualcomm Inc fell 5.3 per cent after it warned that difficult economic conditions and a slowdown in smartphone demand could hit its mainstay handset chips business.
Shares of Apple Inc fell 0.7 per cent while Amazon.com Inc shed 1.4 per cent ahead of their quarterly reports after markets closed.
The Nasdaq clocked its biggest daily percentage gain since April 2020 on Wednesday after the US Federal Reserve raised interest rates as expected and comments by Fed Chairman Jerome Powell eased some investor worries about the pace of rate hikes.
The US central bank's tightening cycle has hammered mega-cap stocks as future cash flows, on which valuations of these companies rest, are discounted heavily when rates rise.
In early trading, the Dow Jones Industrial Average was down 121.60 points, or 0.38 per cent, at 32,075.99, the S&P 500 was down 15.35 points, or 0.38 per cent, at 4,008.26, and the Nasdaq Composite was down 84.78 points, or 0.70 per cent, at 11,947.64.
Defensive sectors, including S&P 500 utilities and real estate gained more than 1.0 per cent each in early trading, pointing to a largely risk-off day.
Ford Motor Co gained 3.5 per cent after reporting a better than expected quarterly net income.
Advancing issues outnumbered decliners for a 1.30-to-1 ratio on the NYSE while declining issues outnumbered advancers for a 1.33-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and 30 new lows while the Nasdaq recorded 38 new highs and 41 new lows.
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