US stocks lost points after the GDP report, oil prices increased because of Middle East news

The US stock market dropped in the trading session on Thursday (April 25) after statistics showed a sharp economic slowdown and persistently high inflation. However, crude oil prices still had an increase due to investors’ concerns that geopolitical instability in the Middle East could escalate again.

At closing, the Dow Jones index lost 375.12 points, equivalent to a decrease of 0.98%, to 38,085.8 points. The S&P 500 index decreased 0.46%, to 5,048.42 points. The Nasdaq index slid 0.64% to 15,611.76 points.

A report from the US Department of Commerce shows that the country’s gross domestic product (GDP) in the first quarter increased by 1.6%. This increase is much lower than the 2.4% increase forecast by economists in a survey by Dow Jones news agency.

Not only does it bring bad news about growth, the report also brings bad news about inflation. The personal consumption expenditures price index (PCE) – the inflation measure favored by the US Federal Reserve (Fed) – increased 3.4% over the same period last year, a sharp acceleration compared to the increase of 1 .8% recorded in the previous quarter. The data increased concerns about the persistence of inflation and reinforced doubts about whether the Fed could cut interest rates soon.

Analysts say the report shows signs of a “stagflation” environment – weak growth combined with high inflation – that could pose a major obstacle for monetary policy makers in the near future.

“In the short term, these figures do not appear to be a ‘green light’ for both bulls and bears… However, the uncertainty that the report brings will not help relieve the pressures that the market is facing. The market is experiencing this decline, the deepest decline since last year,” said Director Chris Larkin of the E*Trade department of investment bank Morgan Stanley.

After the GDP report was released, traders continued to reduce expectations for the Fed to lower interest rates. The futures interest rate market reflects the possibility that the Fed will only cut interest rates once this year – according to data from CME’s FedWatch Tool.

Technology stocks were the group that fell the most this session, under pressure from concerns about higher interest rates for longer. Meta – the parent company of social network Facebook – saw its shares fall 10.5% after announcing unattractive forecasts for Q2 business results. IBM chip company shares fell 8.3% due to revenue. The first quarter did not meet investors’ expectations.

The GDP report depressed crude oil prices in the first half of the session, but traders quickly realized that the market is still tight and the Middle East situation is not yet free of risks, according to the company’s director Manish Raj. Velandera Energy Partners.

Geopolitical concerns emerged again when Israel conducted air strikes on Rafah in the Gaza Strip, preparing for a ground attack on the city. Israel’s move comes despite warnings from allied countries that such an operation would further complicate the humanitarian crisis in Gaza.

The price of Brent crude oil futures in the London market increased by 0.99 USD/barrel, equivalent to an increase of 1.12%, closing at 89.01 USD/barrel. WTI oil futures price in New York increased by 0.76 USD/barrel, equivalent to an increase of 0.92%, closing at 83.57 USD/barrel.

Before this increase, oil prices fell on Wednesday, when Goldman Sachs said that global oil inventories were increasing.

According to a report by Piper Sandler, oil prices have lost $2.50/barrel in geopolitical risk premium since last week, due to escalating tensions between Israel and Iran. This report states that oil prices are moving sideways but the room for decline seems limited.

Piper Sandler analyst Jan Stuart said that the possibility of a US economic recession is very low, because the country’s unemployment rate is low, consumer and business sentiment are still good, and growth prospects are not promising. bad. That means the oil consumption demand of the world’s largest economy will remain stable.