Stocks Fall as GDP Report Disappoints
Stocks slid and Treasury bond yields tumbled Thursday after the government reported first-quarter economic growth that was well below forecasts.
In a broad sell-off, the Dow Jones industrial average lost 128.43 points, or 1.3%, to 10,070.37, the biggest drop since April 15.
The Standard & Poor’s 500 sank 13.16 points, or 1.1%, to 1,143.22.
The blue-chip Dow and S&P; indexes held above their recent closing lows of 10,012.36 and 1,137.50, respectively, set April 20. But barometers of smaller stocks fared worse.
The Russell 2,000 small-stock index plunged 12.12 points, or 2.1%, to 575.02, its lowest finish since Oct. 25.
The Nasdaq composite fell 26.25 points, or 1.4%, to 1,904.18, below the previous 2005 low of 1,908.15 on April 15 and also the worst finish since October.
Losers topped winners by more than 2 to 1 on the New York Stock Exchange and by nearly 3 to 1 on Nasdaq.
With more than 50 companies in the S&P; 500 reporting quarterly results, it was one of the busiest days of the earnings season. But investors were distracted from many positive reports by the disappointing first-quarter gross domestic product report, which pegged growth at an annualized rate of 3.1%, down from 3.8% in the fourth quarter.
The report showed business inventories mounting and a key inflation gauge accelerating.
Many investors had anticipated that high energy prices would take a bite out of first-quarter growth, but the GDP report and other recent data have raised concerns that the economy’s soft patch could be worse than had been foreseen.
“The market’s having trouble with the question of how much the economy is going to slow,” said Scott Wren, senior equity strategist at brokerage A.G. Edwards & Sons in St. Louis.
In recent weeks, concerns about the economy have hammered shares of many industrial firms and others whose fortunes are closely tied to the economy’s swings. Those sectors fell sharply again Thursday.
Some investors sought shelter in Treasury bonds. The 10-year T-note yield ended at 4.15%, down from 4.23% on Wednesday and the lowest since mid-February. The yield had been as high as 4.65% on March 22.
Most economists still are betting that the Federal Reserve will raise its benchmark short-term interest rate from 2.75% to 3% when policymakers meet Tuesday, continuing a string of increases that began in June.
But plunging bond yields are signaling that Wall Street thinks the Fed is getting close to pausing in its credit-tightening campaign, some analysts say.
Among the day’s highlights:
* Industrial stocks falling sharply included iron ore miner Cleveland-Cliffs, down $3.30 to $57.40; Illinois Tool Works, down $1.76 to $82.75; and steelmaker Wheeling-Pittsburgh, down $2.02 to $23.80.
* Energy stocks also were lower, even though near-term crude oil futures edged up 16 cents to $51.77 a barrel in New York. Exxon Mobil sank $2.38 to $56 after its higher quarterly earnings failed to thrill investors. Other issues losing ground included Occidental Petroleum, down $2.24 to $67.30, and Anadarko, off $1.55 to $72.07.
* As investors sold industrial issues, some bought shares in the healthcare and food industries. Earnings of companies in those sectors are considered less sensitive to economic swings. Drug firm Merck added 30 cents to $33.79; Kellogg rose 76 cents to $43.56 and Procter & Gamble was up 46 cents to $53.99.
Starbucks shot up $2.15 to $48.56. The coffee retailer lifted its full-year earnings forecast by 2 cents, to $1.19 a share.
But Molson Coors Brewing, created through the merger of Adolph Coors and Molson, plunged $14.30, or 19%, to $63 after the company reported an unexpected first-quarter loss.
* William Lyon Homes rose $2.24 to $88.22 after jumping $10.73 on Wednesday. Late Tuesday, the Newport Beach-based builder’s founder offered $82 a share for the 28% of the shares he didn’t already own. The stock’s surge above the bid price indicates that many investors expect the offer to be raised.
* In currency trading, the euro slipped to $1.29 from $1.294 despite the U.S. GDP report. Although U.S. growth has slowed, growth in Europe is expected to be even weaker this year, undercutting the euro, analysts said.
