- Stocks edged were mostly flat on Thursday after a deep rout on Wednesday.
- The Nasdaq and the S&P 500 are coming off their worst single-day drops since 2022.
- Second-quarter GDP data showed the economy grew at 2.8% in the second quarter, much more than expected.
US stocks hovered around little changed on Thursday, looking to erase some of the deep losses incurred in Wednesday's session. Traders were assessing tech weakness and hotter-than-expected GDP data for the second quarter.
The Nasdaq and S&P 500 are looking to recover from their worst single days since 2022, which saw them slip 3.6% and 2.3%, respectively.
Investors' top concern is slowing tech earnings growth after Tesla and Alphabet both reported disappointing results on Tuesday. Following a period of stellar growth and stock gains, markets are assessing whether the latest sell-off is full on correction or merely a soft reset.
"There are a cocktail of reasons affecting different parts of the market ranging from cost and profitability of AI investments, weakening consumer outlook, trade tariffs and sanctions on sales to China and the anticipation of a new rate cutting cycle from the Federal Reserve," Mike Owens, senior sales trader at Saxo, said Thursday.
"Some of the equity sell off feels completely logical, investors can crystallize tech stock profits and still lock in over 4% yield on government bonds rather than risk losing 5-6% a day on some of the favoured equity names."
Tech bulls see the sell-off as a short-lived blip, arguing that the market is still in the earliest stages of an AI capex boom that will continue to drive fresh gains.
"Patience will be required on the AI spending payback as we have discussed on Microsoft, Google, Meta, Tesla, Amazon, Apple and many other tech names," Wedbush Securities' Dan Ives wrote Thursday.
Here's where US indexes stood shortly after the opening bell on Thursday:
- S&P 500: 5,424.92, down less than 0.1%
- Dow Jones Industrial Average: 39,973.61, up 0.3% (120 points)
- Nasdaq composite: 17,278.95, down 0.4%
Meanwhile, investors are digesting second-quarter GDP data, which showed the US economy grew by 2.8%. That's much higher than estimates of 2.1% and higher than the first quarter's revised reading of 1.4%.
"The US economy is much stronger than people realize and to the extent that markets were worried about a growth slowdown, they should breathe a sigh of relief after this morning's GDP number," Chris Zaccarelli, CIO of Independent Advisor Alliance, said.
"The 2.8% growth in the economy above and beyond inflation is very impressive, and the recent pullback in stocks will likely prove to be a buying opportunity."
The data could possibly reset rate-cut bets as the Fed deals with a hotter economy and less wiggle room to slash interest rates multiple times in the last few months of the year.
Markets still see an 85% chance the Fed cuts rates at the September meeting, and strong odds of cuts at the November and December meetings, according to the CME FedWatch Tool.
Next up on Friday, traders will be assessing the Fed's favorite inflation gauge. Personal consumption expenditures are expected to show inflation rose 2.5% last mont.
Here's what else is going on today:
- There are four bullish signals pointing to more gains ahead for the stock market, Bank of America said.
- There's a big rotation from cash to stocks — and it could help push the S&P 500 up 17% by the end of the year, according to UBS.
- The stock market is approaching two catalysts that could help spark the next leg of the bull run.
- The Fed is going to cut rates only once in 2024 as shelter inflation is too high and the job market remains too hot, Vanguard said.
In commodities, bonds, and crypto:
Oil futures were up. West Texas Intermediate crude oil rose 0.9% to $77.65 a barrel. Brent crude, the international benchmark, was up 0.7% to $81.57 a barrel.
- Gold inched higher 0.4% to $2,417 an ounce.
- The 10-year Treasury yield dropped two basis points to 4.218%.
- Bitcoin inched up to $66,723.