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Stocks decline as GDP report raises fears of recession

The S&P 500 was down 0.4% as of 10 am Eastern, the Dow Jones Industrial Average dropped 0.4% and the technology-heavy Nasdaq Composite was down 0.6%.

As traders work and watch, a news conference held by Federal Reserve Chair Jerome Powell is displayed at the New York Stock Exchange in New York, Wednesday, July 27, 2022. (AP Photo/Seth Wenig)

Stocks are falling early Thursday as investors reacted to news that the US economy shrank for a second consecutive quarter, sharply raising rears that that the US economy is already in or is heading for a recession.

The S&P 500 was down 0.4% as of 10 am Eastern, the Dow Jones Industrial Average dropped 0.4% and the technology-heavy Nasdaq Composite was down 0.6%.

The US economy shrank from April through June, contracting at a 0.9% annual pace. The decline that the Commerce Department reported Thursday in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March.

The Federal Reserve is trying to slow the US economy to fight inflation without tipping it into a recession. (AP Photo/Seth Wenig)

Consecutive quarters of falling GDP constitute an informal, though not definitive, indicator of a recession. The GDP report for last quarter pointed to weakness across the economy.

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Consumer spending slowed as Americans bought fewer goods. Business investment fell. Inventories tumbled as businesses slowed their restocking of shelves, shedding 2 percentage points from GDP.

The Federal Reserve is trying to slow the US economy to fight inflation without tipping it into a recession.

The central bank raised its key short-term interest rate by 0.75 percentage points on Wednesday. Shares of Facebook’s parent company Meta Platforms are down 8% after the social media giant said its revenue fell last quarter for the first time ever, dragged down by a drop in ad spending.

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Spirit Airlines shares rose 3%. JetBlue said it agreed to buy the budget airline for $3.8 billion to create the nation’s fifth largest airline, if approved by US regulators. The agreement comes a day after Spirit’s attempt to merge with Frontier Airlines fell apart.

First published on: 28-07-2022 at 09:04:53 pm
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