S&P 500 prices rebound after GDP day failure: markets close

(Bloomberg) — The world’s biggest stock market was hit by a price crash in a session that saw stocks fall and bonds rise after economic data signaled a slowdown in momentum.

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Traders reported real-time pricing issues for the S&P 500 Index and Dow Jones Industrial Average for an hour and 20 minutes, ending at noon in New York. Prices for individual stocks, exchange-traded funds and Nasdaq indexes continued to print normally during the outage.

“At the time it came out, I wasn’t worried,” said Mike Zigmont of Harvest Volatility Management. “Futures were still trading, so you could use them to get the SPX level. Most traders who know enough didn’t care.”

Read: Traders Say Disruptions Are Minimal During S&P 500 Price Crash

Just 24 hours before the release of the Federal Reserve’s preferred price indicator, data showed that the US grew at a softer pace – as both spending and inflation were reduced. The economic slowdown means authorities may have room to reduce rates this year. But this can also be a concern for consumption and therefore for company profits.

“Current economic data is a double-edged sword,” said Chris Zaccarelli of the Independent Advisor Alliance.

New York Fed Bank President John Williams said he expects inflation to continue falling in the second half of this year, adding that high borrowing costs are constraining the economy.

Read: The Fed thinks it is fighting inflation. Think Again: Bill Dudley

The S&P 500 fell to around 5,250, led by losses in technology stocks. Salesforce Inc. suffered its biggest drop in nearly two decades after a weak outlook. Dell Technologies Inc. will report earnings after the close. Kohl’s Corp. plunged more than 20% when the department store chain lowered its full-year guidance.

Two-year Treasury yields fell five basis points to 4.92%. The dollar retreated. Oil fell despite U.S. data showing the biggest drop in the country’s inventories in five weeks, with traders looking ahead to Sunday’s OPEC+ meeting for more supply guidance.

Gross Domestic Product grew 1.3% annualized in the first three months of the year, below the previous estimate of 1.6%. The economy’s main driver of growth – personal spending – advanced 2%, against the previous estimate of 2.5%.

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Regarding inflation, the personal consumption expenditure price index rose at an annualized rate of 3.3% in the first quarter, slightly below the initial projection.

Zaccarelli says he has long believed the economy is more important than lower interest rates in supporting stock prices.

“Of course they are interconnected because, all things being equal, the economy will probably stay out of recession if interest rates are lower than they are now, but ultimately it is economic expansion – and continued corporate profits – which are the most important factors. something important in the medium and long term”, he noted.

Their base case this year is that inflation remains relatively sticky and the Fed remains on the sidelines for most – if not all – of 2024, but also that the economy continues to expand and corporate profits continue to rise. to grow.

“Therefore, the stock market should remain bullish despite the occasional pullback along the way,” he noted.

“It was a bond-friendly round of data,” said Ian Lyngen of BMO Capital Markets. “We are looking for a decline in rates throughout the day as investors adjust their positions ahead of Friday’s core PCE update and the end of the month.”

The Fed’s top-line inflation gauge is poised to show some modest relief from persistent price pressures, corroborating central banks’ prudence about the timing of interest rate cuts.

Economists expect the price index for personal consumption expenditures minus food and energy – forecast for Friday – to rise 0.2% in April. That would represent the smallest advance so far this year for the measure, which provides a better picture of underlying inflation.

“The name of the game is still inflation and interest rates, and despite an expected downward revision to GDP, there wasn’t much in today’s data that would shake up the status quo,” said Chris Larkin of E*Trade at Morgan Stanley. “Keep an eye on tomorrow’s PCE price index release because it could dominate market sentiment until next Friday’s jobs report.

Signs that the economy may be cooling enough to pave the way for rate cuts, along with strong corporate profits, proved good for stocks.

This is according to an analysis by strategists at Bank of America Corp., who analyzed data dating back to 1950 to determine that previous quarters of declining economic growth and rising corporate profits saw the S&P 500 advance 3.6%, average. This is higher than the average 2% gain seen when both corporate profits and US gross domestic product increased.

Corporate Highlights:

• The sales and trading team at Bank of America Corp. is on track to report second-quarter revenue growth in the low single digits, with the investment bank increasing 10% to 15% from a year ago, CEO Brian Moynihan said.

• HP Inc. reported quarterly revenue that beat analysts’ estimates, including the first increase in PC sales in two years, an optimistic sign for a long-awaited recovery in the market.

• Best Buy Co. reported better-than-expected profitability in the first quarter, even as sales problems worsened and consumers remained on the sidelines in their electronics purchases.

• Birkenstock Holding Plc reported robust earnings and raised its forecast for the year as consumers snapped up its high-quality sandals and clogs. Stocks rose the most ever.

• won bankruptcy court approval to shed billions of debt, strip unprofitable leases from its portfolio of office workspaces, and leave behind co-founder Adam Neumann’s legacy.

Main events this week:

• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday

• China’s official manufacturing and non-manufacturing PMI for Friday

• Eurozone CPI, Friday

• US Consumer Income, Spending, PCE Deflator, Friday

• Fed’s Raphael Bostic speaks on Friday

Some of the main movements in the markets:

Actions

• The S&P 500 was down 0.2% at 1:09 p.m. New York time

• The Nasdaq 100 fell 0.5%

• The Dow Jones Industrial Average fell 0.7%

• MSCI World Index little changed

Coins

• The Bloomberg Dollar Spot Index fell 0.3%

• The euro rose 0.4% to $1.0843

• The British pound rose 0.3% to $1.2742

• The Japanese yen rose 0.6% to 156.72 per dollar

Cryptocurrencies

• Bitcoin rose 2% to $68,728.38

• Ether rose 0.9% to $3,782.57

Titles

• The 10-year Treasury yield fell seven basis points to 4.55%

• Germany’s 10-year yield fell four basis points to 2.65%

• Britain’s 10-year yield fell five basis points to 4.35%

goods

• West Texas Intermediate crude fell 1.8% to $77.81 a barrel

• Spot gold rose 0.4% to $2,347.20 an ounce

This story was produced with help from Bloomberg Automation.

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