Wall Street stocks fall as weak GDP growth spreads rate-cut gloom

Wall Street stocks fell on Thursday as markets were stunned by data showing slower-than-expected U.S. economic growth and persistent inflation coupled with a sell-off in large cap stocks triggered by disappointing results from Meta Platforms META.

Data on Thursday showed that the U.S. economy grew at its slowest pace in nearly two years in the first quarter while inflation accelerated, dampening hopes that the Federal Reserve would begin cutting interest rates this year.

Disappointing results from Meta, whose shares are down 11%, is also weighing on market sentiment. Three other Magnificent Seven stocks, including Alphabet GOOG, Amazon.com AMZN and Microsoft MSFT, are also down between 1.8% and 2.7%.

Equities in the communications sector, dragged down by Meta, are currently the biggest losers in S&P 500 SPX, and are on track for their biggest one-day decline since October. Other categories of stocks losing ground are in real estate, consumer discretionary, financials, healthcare and consumer staples.

Alphabet, Microsoft and Intel INTC are scheduled to report their quarterly numbers on Thursday after markets close.

"The GDP numbers definitely puts a ding in the paradigm that markets were hanging onto for equities in terms of high growth; and if you don't have high growth that will translate to lower-than-expected earnings," said James St. Aubin, chief investment officer at Sierra Mutual Funds in California.

At 02:57 p.m. the Dow Jones Industrial Average DJI fell 468.28 points, or 1.21%, to 37,993.75, the S&P 500 SPX lost 35.07 points, or 0.69%, to 5,036.56 and the Nasdaq Composite IXIC lost 146.69 points, or 0.93%, to 15,566.06.

Money markets are pricing in just about 36 basis points of rate cuts from the Fed this year, down from about 150 bps seen at the start of the year, according to LSEG data.

Separately, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to still tight labor market conditions. The March Personal Consumption expenditures (PCE) index, the Fed's preferred inflation gauge, is due on Friday.

"The double whammy was also the inflation number that came in stronger than expected so there wasn't really a silver lining in that report; it's still positive in absolute terms but relative to high expectations it was disappointing," St. Aubin added.

International Business Machines IBM fell 8.4% after it announced a $6.4 billion deal to buy HashiCorp HCP alongside its first-quarter results, in which revenue missed estimates.

Southwest Airlines LUV slid 9.1% as the carrier slashed its projections for new aircraft deliveries from Boeing BA in 2024 for the third time.

Caterpillar CAT lost 6.4% after it cut second quarter sales forecasts as demand for its construction equipment eases from last year's boom.

Rising gold prices helped Newmont NEM, the world's largest bullion miner, to report first quarter profit that beat estimates. Its shares were up nearly 13%.

Declining issues outnumbered advancers by a 2.66-to-1 ratio on the NYSE. There were 56 new highs and 76 new lows on the NYSE. On the Nasdaq, 1,341 stocks rose and 2,765 fell as declining issues outnumbered advancers by a 2.06-to-1 ratio.

The S&P 500 posted 13 new 52-week highs and seven new lows while the Nasdaq recorded 33 new highs and 183 new lows.