U.S. stocks extended losses on Thursday afternoon with the Nasdaq Composite sliding further into correction territory following another batch of disappointing megacap company earnings. A blockbuster report on summertime economic growth and retreating Treasury yields also failed to bolster market sentiment.

How stock indexes are trading

  • The Dow Jones Industrial Average
    DJIA
    fell 267 points, or 0.8%, to 32,767.

  • The S&P 500
    SPX
    fell 56 points, or 1.4%, to 4,129.

  • The Nasdaq Composite
    COMP
    declined by 271 points, or 2.1%, to 12,551.

On Wednesday, the Nasdaq closed 10.7% lower from its 2023 closing high of 14,358.02, reached July 19. The S&P 500, logged its lowest close since May 31, erasing all of its summer gains.

What’s driving markets

A preliminary reading on third-quarter U.S. GDP came in hotter than expected on Thursday morning, with data from the Commerce Department showing the economy grew at an annualized pace of 4.9%, surpassing the 4.7% pace that Wall Street had expected.

Consumer spending, the main engine of U.S. growth, rose at a 4% clip from July to September, the government said Thursday.

Callie Cox, a U.S. equity strategist at eToro, said the latest data should help assuage concerns about an imminent recession in the U.S., although an economic downturn remains a possibility.

“The U.S. economy was incredibly resilient last quarter. Growth was spectacular, mainly due to how much money Americans spent,” Cox said.

“Consumer spending had its biggest contribution to economic growth since the end of 2021, and inventories grew as retailers scrambled to meet demand. It’s hard to say we’re in — or even near — a recession with this kind of GDP print.”

See: Q3 GDP: Live coverage of data showing 4.9% growth

While the backward-looking GDP report came in stronger than expected, it remains to be seen whether the consumer can maintain resiliency in the coming quarters, economists said.

“Investors should not be surprised that the consumer was spending in the final months of the summer — the real question is if the trend can continue in the coming quarters, and we think not,” said Jeffrey Roach, chief economist at LPL Financial. He said it was too early to be dogmatic about the final quarter of the year, but that investors should expect some deceleration in momentum.

Fed-funds futures traders continued to expect no change in target rates at the coming Federal Reserve policy meetings, according to the CME FedWatch Tool. The chance of a 25-basis-point rate hike to a range of 5.5%-5.75% at the subsequent meeting in December was seen at 20% on Thursday, down from 27.3% in the previous session.

See: The Nasdaq just fell into a correction. Now what?

Meanwhile, poorly received earnings reports from some of the biggest U.S. technology companies continued to weigh on the market.

This time, Facebook-parent Meta Platforms Inc.
META,
-3.22%
was the latest “Magnificent Seven” company to release disappointing results, following Alphabet Inc.
GOOG,
-1.95%
and Tesla Inc.
TSLA,
-2.43%.

Next up on the big-tech earnings docket is Amazon.com
AMZN,
-1.20%,
which will report after Thursday’s close. Chipotle
CMG,
-1.64%,
Intel
INTC,
-0.38%
and Ford Motor
F,
-0.78%
are also set to report after the closing bell.

Treasury yields were slipping on Thursday, with the 10-year Treasury yield
BX:TMUBMUSD10Y
down 9 basis points at 4.85%. The yield on the benchmark bond briefly topped 5% for the first time since 2007 earlier this week. However, market analysts surmised that Treasury yields may need to fall further to help boost stocks.

In other news, the United Auto Workers said it reached an agreement to end the strike at Ford. Investors also digested data on weekly jobless claims, which rose by 10,000 to 210,000, but remained relatively low, a sign that companies continue to hang on to workers.

Companies in focus

— Jamie Chisholm contributed

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