Stocks, Bonds Tumble After Economic Data Release

Worries about slowing economic growth and sticky inflation drove broad-based declines across stocks and government bonds Thursday.

A drop in shares of bellwether stock Caterpillar helped push the Dow Jones Industrial Average down more than 300 points, or 1%. The S&P 500 lost 0.5%. The tech-heavy Nasdaq Composite shed 0.6%, pulled down by Facebook parent Meta Platforms.

Fresh data released Thursday morning held two bits of disappointing news for investors: U.S. economic growth slowed more than expected in the latest quarter, while inflation is proving stickier than many investors hoped. This combination deflated hopes about the prospect of imminent interest-rate cuts and drove Treasury yields higher.

The yield on the 10-year Treasury note jumped to 4.706%, continuing a topsy-turvy week of trading for government bonds.

“It’s becoming difficult to justify rate cuts this year,” said Alessio de Longis, a senior portfolio manager at Invesco.

Stocks dropped sharply after the opening bell and then pared some of those declines later in the session, with shares of energy companies, utilities and some technology companies edging into positive territory.

The communication services sector, home to several tech titans, was the worst performer, falling 4%.

The group declined after Meta Platforms offered an unwelcome reminder that keeping up in the artificial intelligence race doesn’t come cheap. The company, which also owns Instagram, saw its shares tumble more than 10%, its biggest one-day decrease since October 2022. International Business Machines’ shares fell more than 8%, while Microsoft dropped 2.5%.

Optimism about artificial intelligence has helped propel indexes to records over the past year. Michael Smith, a managing director at Allspring Global Investments, said that he expected greater scrutiny of how artificial intelligence investments are hitting companies’ bottom lines this year.

“2023 was about the narrative,” Smith said. “2024 is about the numbers.”

In the metals market, copper prices rose to $4.57 per pound, the highest settle value since April 2022.

Write to Gunjan Banerji at [email protected]