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Fears of runaway inflation and aggressive monetary policy
tightening biting into economic growth have spooked markets
ahead of the Commerce Department's advance second-quarter GDP
report, which will however, still show that the economy was
losing momentum.
A Reuters survey of economists showed GDP growth likely
rebounded at a 0.5% annualized rate last quarter, following a
negative reading for the first three months of the year.
Two consecutive quarters of declines in growth are traditionally
considered a recession, but the private research group that is
the official arbiter of U.S. recessions looks at a broad range
of indicators instead, including jobs and spending.
"We don't think we're in a recession, but there is a risk that
you get that headline of two negative quarters, mainly because
of exports and inventories," said Willem Sels, HSBC's global
chief investment officer for private banking and wealth.
"I think the market is pricing in a small contraction, so I
don't think investors will be spooked by it, but from a broader
set of indicators that we're looking at, it's clear that we're
still slowing."
Worries of a recession hit Meta Platforms Inc shares, which fell
5.3% in premarket trading after it posted its first ever
quarterly drop in revenue.
Qualcomm Inc fell 3.7% after it warned that difficult economic
conditions and a slowdown in smartphone demand could hit its
mainstay handset chips business.
Other technology and high-growth stocks led declines, with Apple
Inc off 0.6% and Amazon.com Inc down 0.9% ahead of their
quarterly reports after market close.
The Nasdaq index clocked its biggest daily percentage gain since
April 2020 on Wednesday after the U.S. Federal Reserve raised
interest rates as expected and comments by Fed Chairman Jerome
Powell eased some investor worries about the pace of rate hikes.
The U.S. central bank's tightening cycle has hammered mega cap
stocks as future cash flows, on which valuations of these
companies rest, are discounted heavily when rates rise.
At 6:46 a.m. ET, Dow e-minis were down 56 points, or 0.17%, S&P
500 e-minis were down 11.25 points, or 0.28%, and Nasdaq 100
e-minis were down 79 points, or 0.63%.
Ford Motor Co rose 5.6% after it reported a better-than-expected
quarterly net income.
(Reporting by Aniruddha Ghosh & Shreyashi Sanyal in Bengaluru;
Editing by Shounak Dasgupta)
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