Marketbites: U.S. Economic Growth Decelerates
Portfolio Manager Commentary:
Despite new data showing weaker-than-expected GDP growth, stocks rose on Thursday on the back of strong results from Meta Platforms that boosted tech-related names. Meta shares leapt nearly 14% after the release of their strong quarterly revenue that beat expectations with an upbeat forecast that delighted investors. Several analysts hiked their price targets following the release. Shares of other tech names such as Amazon, Alphabet, Microsoft, and Apple, also popped.
Meanwhile, new GDP data was underwhelming. U.S. economic growth decelerated to a 1.1% annual rate in the first quarter as consumers faced high inflation, rising interest rates, and the onset of banking problems. Economists polled by Dow Jones had forecasted a greater expansion of 2%.The rise in U.S. gross domestic product in the first three months of the year marked a slowdown from high inflation- and seasonally adjusted 2.6% growth in the fourth quarter, the Commerce Department said Thursday. This slowdown may suggest to some investors that the Federal Reserve could soon wrap up its tightening campaign. The Fed is slated announce its latest policy decision next week.
Honeywell, an industrial bellwether, added more than 4% on the back of a quarterly report that was better than Wall Street expected. Teladoc and Comcast were among the other companies trading higher after releasing earnings reports.
However, Caterpillar, another barometer of the global economy, fell around 0.9% as investors feared a build-up in inventory suggests demand is slowing.
Chart of the Day:
Consumption, the main driver of the economy, was a bright spot. The Fed has been trying to slow growth below its long-run trend of around 2%. While that happened in Q4 of 2022, the report also reflected firm underlying demand, as the solid labor market drove overall consumer spending.
Personal-consumption expenditures rose 3.7% in the first quarter as consumers spent more on goods and services, the Commerce Department said. That was the fastest pace since the second quarter of 2021 and up from 1% in the prior quarter, the department said.
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