We got the first look at second quarter US economic growth on Thur. The Bureau of Economic Analysis estimates US GDP fell 0.9% at an annualized pace for the period. This followed a contraction of 1.6% in 1Q2022, putting the US into a technical recession by many standards.
The more official definition of a recession comes from the National Bureau of Economic Research (NBER), which defines it as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” We won’t hear whether the NBER thinks the US is in a recession for several months.
As Rick Santelli of CNBC said on Thur, “it does not matter what you call it, it matters how the market trades it,” and traders on Wall Street responded to the disappointing economic news by buying stocks and US Treasuries.
The Dow Jones Industrial Average gained 332.04 pts or 1.03% to close at 32,529.63. The S&P 500 index rose 1.21%. The tech-heavy Nasdaq Composite advanced 1.08%. The small-cap Russell 2000 gained 1.34%.
The yield on the 10-year Treasury note slipped 10.9 basis points (bps) to 2.6759%, while the yield on the 2-year Treasuries fell 13.57 bps to 2.8622% on Thurs. Bond prices and yields trade in opposite directions.
Shares of Apple (AAPL US, +0.41%), Microsoft (MSFT US, +2.88%), Amazon (AMZN US, +1.13%), Alphabet (GOOGL US, +1.13%), and NVidia (NVDA US, +1.11%) rose, but shares of Meta Platforms (META US,-5.17%) fell. Meta reported its first-ever quarterly drop in revenue on Wed. Adding salt to CEO Mark Zuckerberg’s wounds, US Federal Regulators took action to dash his dream of dominating the metaverse. The FTC filed a complaint in federal court against Meta to stop it from acquiring virtual reality company Within Unlimited.
In extended-hours trading, Apple and Amazon shares have gained 3.0% and 13.6% respectively. After the bell, both reported earnings. Amazon’s huge jump came after it gave a strong sales forecast for the current quarter.
The front-month Brent futures closed up 52 cents at US$107.14/bbl while WTI closed down 84 cents at US$96.42/bbl respectively.
The ICE dollar index (DXY), which measures the strength of the greenback against a basket of currencies, fell 0.09% to 106.531.
European equity markets finished mixed on Thur. The UK FTSE lost 0.04%, France's CAC 40 rose 1.3%, while the German DAX advanced 0.88%.