Wall St. Falls Sharply on Economy Data 04/25 09:36

   U.S. stocks are tumbling Thursday after a report suggesting flagging 
economic growth and still-high inflation hurt the hopes that have kept Wall 
Street high recently. A sharp drop for Meta Platforms, one of Wall Street's 
most influential stocks, also dragged the market lower.

   NEW YORK (AP) -- U.S. stocks are tumbling Thursday after a report suggesting 
flagging economic growth and still-high inflation hurt the hopes that have kept 
Wall Street high recently. A sharp drop for Meta Platforms, one of Wall 
Street's most influential stocks, also dragged the market lower.

   The S&P 500 was down 1.4% in early trading, slicing off two-thirds of what 
had been a big winning week so far. The Dow Jones Industrial Average was down 
563 points, or 1.5%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 
2.1% lower.

   Meta Platforms, the parent company of Facebook and Instagram, dropped 14.1% 
even though it reported better profit for the latest quarter than analysts 
expected. Investors focused instead on big investments in artificial 
intelligence Meta pledged to make. AI has created a frenzy on Wall Street, but 
Meta is increasing its spending when it also gave a forecasted range for 
upcoming revenue whose midpoint fell below analysts' expectations.

   Expectations had built very high for Meta, along with the other "Magnificent 
Seven" stocks that drove most of the stock market's returns last year. They 
need to hit a high bar to justify their high stock prices.

   The entire U.S. stock market felt the pressure of another jump in Treasury 
yields following the disappointing data on the U.S. economy. The report pierced 
one of the main beliefs that had sent the S&P 500 to multiple records this 
year: The economy can remain rugged and support strong profits for companies, 
even if high inflation takes longer than expected to extinguish fully.

   Instead, Thursday's report suggested the U.S. economy's growth slowed during 
the first three months 2024 to a 1.6% annual rate from 3.4% at the end of 2023. 
That was well below forecasts for 2.2% growth.

   That by itself would have been disappointing. Making it worse for financial 
markets, the report also said inflation was hotter during the three months than 
economists forecast. That could tie the hands of the Federal Reserve, which 
normally juices sluggish economies by cutting interest rates.

   Thursday's economic data will likely get revised a couple times as the U.S. 
government fine-tunes the numbers. But the lower-than-expected growth and 
higher-than-expected inflation is "a bit of a slap in the face to those hoping" 
for a near-perfect scenario where the economy could escape recession while 
corralling high inflation, said Brian Jacobsen, chief economist at Annex Wealth 
Management.

   "Things can change a lot from one quarter to the next, so it's too early to 
say the Fed has failed, but this doesn't help their cause."

   Treasury yields surged immediately after the economic report's release as 
traders pulled back on bets for cuts to rates this year by the Federal Reserve.

   The yield on the 10-year Treasury jumped to 4.72% from 4.66% just before the 
report and from 4.65% late Wednesday. The two-year Treasury yield, which more 
closely tracks expectations for the Fed, jumped back above 5% to 5.01% from 
4.93% late Wednesday.

   Traders are now largely betting on the possibility of just one or maybe two 
cuts to interest rates this year by the Fed, if any, according to data from CME 
Group. They came into the year forecasting six or more. A string of reports 
showing both inflation and the economy remaining hotter than forecast has 
crushed those expectations.

   Top Fed officials themselves have hinted recently that they may need to keep 
rates high for a while to get full confidence inflation is heading down toward 
its target. The Fed has been keeping its main interest rate at the highest 
level since 2001. High interest rates slow the overall economy and hurt prices 
for investments.

   With interest rates looking to stay high for a while, more pressure is on 
companies to deliver bigger profits.

   Southwest Airlines fell 9.5% after the carrier reported worse results for 
the first quarter than analysts expected. CEO Robert Jordan said the airline 
was reacting quickly "to address our financial underperformance" and cope with 
delayed deliveries of new planes from Boeing. It will limit hiring, offer 
voluntary leave to employees and stop flying to four airports.

   In stock markets abroad, Japan's Nikkei 225 slid 2.2% as investors wait to 
hear whether the Bank of Japan will make any moves to prop up the tumbling 
value of the yen.

   Indexes were mixed elsewhere in Asia and Europe.