However, stocks ended Thursday’s sell-off after the latest economic data came in weaker than expected, but some observers said the reaction was overdone. U.S. quarterly gross domestic product grew at its slowest pace in two years and inflation remained above target, raising concerns that the Federal Reserve’s interest rate policy path could become more complicated, the index fell on Thursday. US GDP grew at an annual rate of 1.6% in the first quarter, below the 2.4% forecast by economists polled by Dow Jones. The personal consumption price index, a key inflation variable for the Fed, rose 3.4% at an annual rate, its biggest increase in a year. “This report is the best of both worlds,” wrote Chris Zaccarelli, director of investments at the Independent Advisor Alliance. There’s going to be news.” The Dow Jones Industrial Average was down nearly 700 points, or 1.8%, in its intraday session. The 30-stock index closed down 375 points. Elsewhere, the US 10-year Treasury yield rose above 4.7%. According to the CME FedWatch tool, market expectations for a rate cut in 2024 have dropped to just one in three. But some observers say fears of a recession are overblown. They said that while the overall GDP data missed expectations, it still showed that the Fed could easily manage economic growth. Brian Nick, senior investment strategist at the Macro Research Institute, said: “This report may be better than the market currently believes.” “Stagflation is a combination of stagnant growth and high inflation,” Nick continued. “Higher inflation is above the Fed’s target, lower than a year ago, but still above the Fed’s target, and then you have to stall, but we haven’t seen that yet.DJI 1D Mountain Dow Jones Industrial Average Rest assured, Nick, who sees a recession in his view, Said he expects more stagnation ahead. He cited worrisome signals in recent earnings results, such as Caterpillar’s recent earnings miss. Nick said: “This quarter’s (GDP) report … may not be as bad as the headlines, but we think it will gradually weaken in the next quarter and then (further) indeed,” said Rob Ginsburg, managing director. Wolf Research said there was evidence of continued inflation in the first quarter, especially ahead of Friday’s personal consumption data, the Fed’s preferred inflation measure. “We had the first data about concerns about stagflation, but I think it’s more about inflation now,” Ginsburg said, “if people are worried about slowing economic growth.” On the upside, yields are rising “They’re actually pushing yields, so to me that suggests it has more to do with inflation, on the other hand, Fundstrat’s Tom Lee said soft landing conditions are causing corporate earnings results to beat expectations and inflation being mentioned less frequently in earnings calls. is done “I think the earnings backdrop is very favorable,” Lee said Thursday on CNBC’s “Closing Bell.” “As painful as the last few days and even the last few weeks have been, I actually think the risk/reward here is positive.” – CNBC’s Jeff Cox contributed to this report
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