FX.co ★ U.S. Stocks Regain Ground After Early Sell-Off But Remain Mostly Lower

Stocks sharply increased in the early hours of trading on Thursday but regained their stamina over the day. Even though the major market averages are still decidedly in the negative, they've significantly rebounded from their lowest points of the day.

In the early trading session, the Dow fell by more than 700 points but has since decreased by roughly 344.01 points, or 0.9 percent, landing at 38,116.91. At the same time, the Nasdaq fell by 99.80 points, or 0.6 percent, coming to 15,612.95, while the S&P 500 dropped by 21.98 points, or 0.4 percent, finishing at 5,049.65.

Meta Platforms (META), previously known as Facebook, sparked the initial Wall Street sell-off with a negative reaction to its earnings news, resulting in a 10.1 percent stock dip. Although the company's first-quarter results exceeded both top and bottom-line estimates, its second-quarter revenue guidance fell short of expectations, causing the sharp drop.

Similarly, tech corporation IBM Corp. (IBM) experienced a loss due to its weaker-than-expected first-quarter revenues. However, IBM also announced its acquisition of HashiCorp (HCP) for $35 per share in cash, estimating the deal to be worth around $6.4 billion. Nonetheless, Dow component Merck (MRK) enjoyed a significant increase after reporting first-quarter results that surpassed analysts' predictions.

The Commerce Department's report showing that the U.S. economy grew significantly less than anticipated in the first quarter of 2024 triggered the early Wall Street sell-off. The Department reported a 1.6 percent increase in the gross domestic product (GDP) in the first quarter, following a 3.4 percent surge in the last quarter of 2023 — this fell short of economists' expected 2.5 percent increase.

The Department's data also showed that the personal consumption expenditures price index rose by 3.4 percent in the first quarter, following a 1.8 percent increase in the previous quarter. Additionally, when excluding food and energy prices, the PCE price index soared by 3.7 percent in the first quarter, up from a 2.0 percent rise in the last quarter of 2023.

"The market wishes to see economic growth and corporate profits increase. The Fed, on the other hand, hopes to see inflation start reducing persistently. If neither are going in the preferred direction, that's bad news for markets," said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

Despite the broader markets' recovery attempts, telecom stocks continue to show substantial weakness, with the NYSE Arca North American Telecom Index plunging by 2.9 percent. Software stocks are also displaying significant weakness with the Dow Jones U.S. Software Index posting a 1.8 percent loss.

At the same time, airline, biotechnology, and banking stocks are continuing to experience strong headwinds. Yet, their selling pressure has lessened somewhat compared to earlier in the day.

In contrast, gold stocks have sharply increased, causing a 4.5 percent surge in the NYSE Arca Gold Bugs Index. Similarly, promising strength has been detected in semiconductor stocks, leading to a 2.2 rise in the Philadelphia Semiconductor Index.

International markets have had a mixed performance. Asian-Pacific stock markets were varied, with Japan's Nikkei 225 Index slumping by 2.2 percent and Hong Kong's Hang Seng Index rising by 0.5 percent. The European markets echoed this variety, with the U.K.'s FTSE 100 Index rising by 0.5 percent, while France's CAC 40 Index fell by 0.9 percent and Germany's DAX Index sagged by 1.0 percent.

Lastly, in the bond market, treasuries have improved from their lowest points but remain conclusively negative. Consequently, the yield on the benchmark ten-year note, which fluctuates opposite to its price, has increased by 5.0 basis points to 4.702 percent.