US 10-year yields hit over five-month high after a measure of inflation rose more than expected in the first quarter, and growth rate was weaker than previously thought, data released on April 25 showed. The latest reading reflects inflationary pressures persisting is the US economy, along with patchy economic recovery.
Gross domestic product increased at a 1.6% annualized rate last quarter, below economists’ expectations of a 2.4% rise. Benchmark 10-year Treasury note yields reached 4.70%, the highest since Nov. 2. The latest report shows a 3.7% rise in core Personal Consumption Expenditure (PCE) prices, higher than what was being estimated. Core PCE is considered to be a closely watched measure of underlying inflation in USA.
Dow Jones Industrial Avergae opened sharply lower after the underwhelming Q1 GDP data, indicating an extended selloff for US stocks.
At 7:35 pm IST, the Dow Jones was down 689 points, or 1.71%, at 37,771.68, the S&P 500 was down 74.10 points, or 1.46%, at 4,997.53, and the Nasdaq Composite was down 290.84 points, or 1.85%, at 15,421.91.
The latest economic report has triggered concerns over 'stagflation' in US economy and made US Federal Reserve's interest rate trajectory further uncertain. The US two-year yields, known to be more sensitive to US Fed's rate action spiked to 5%.
Wall Street bleeds
Meta plunged 14.7% after the Facebook-parent forecast higher expenses and lighter-than-expected revenue.
Social media firms such as Snap SNAP.N and Pinterest fell 4.2% and 4.9%, respectively.
Other growth stocks also came under pressure, with Alphabet, Amazon.com and Microsoft down between 4.3% and 4.5%.
Alphabet, Microsoft and Intel are scheduled to report their quarterly numbers on April 25 after markets close.
You can track all the US market action on Moneycontrol right here.
“Stagflation chatter will surely pick up in the wake of these figures, but we’re less concerned with such an outcome as long as the labor market remains so strong,” Ian Lyngen of BMO Capital Markets told Bloomberg.
Traders in US are pricing in a 37 basis points of easing this year in Fed fund futures rate, with the first cut fully priced in for November.
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