By Dan Strumpf
U.S. stocks fell Wednesday after a disappointing reading on U.S.
economic growth, while investors looked ahead to the Federal
Reserve's statement on monetary policy.
The Dow Jones Industrial Average declined 45 points, or 0.3%, to
18065 mid-morning, while the S&P 500 dropped seven points, or
0.3%, to 2108. The Nasdaq Composite Index lost 20 points, or 0.4%,
to 5036.
Weighing down shares was a disappointing reading on U.S. gross
domestic product, which grew at a 0.2% pace in the first quarter,
according to the Commerce Department. The reading came in well
below expectations and was the latest report to suggest a downshift
in the U.S. economy.
Economists surveyed by The Wall Street Journal expected GDP to
grow by 1%. Growth clocked in at 2.2% in the fourth quarter.
"The economic data needs to improve," said David Seaburg, head
of sales trading at Cowen and Co. in New York. "It's just not where
it needs to be ... it's scary."
The early declines followed modest gains in stocks on Tuesday,
with the Dow rising 0.4% and the S&P 500 advancing 0.3%.
Stocks in Europe tumbled as the euro rose sharply against the
dollar. Germany's DAX lost 3%, while France's CAC 40 lost 2.4% and
the Stoxx Europe 600 index shed 2%. The euro gained 1.5% to
$1.1138.
U.S. stocks have advanced in recent weeks, though at an uneven
pace. A weak first-quarter earnings season, coupled with slowing
economic growth and uncertainty over the Fed's timeline for
interest-rate increases, have made for a rockier few months for
shares. The S&P 500 is up 2.1% in April, while the Dow has
gained 1.6%.
Further clues on the pace of Fed tightening could come this
afternoon when the central bank's policy-making committee wraps up
its two-day meeting. The Fed is due to release its statement on
monetary policy at 2 p.m. ET.
The central bank has made clear it won't start moving rates at
its meeting this week. In its statement, the Fed will probably
reiterate that it won't start raising rates until it sees more
improvement in the labor market and is reasonably confident
inflation will move toward its 2% target. Fed Chairwoman Janet
Yellen won't hold a news conference following the statement.
Earnings reports were a mixed bag early Wednesday. Analysts
expect first-quarter earnings among S&P 500 companies to
decline 1.7%, including the 277 companies that have so far reported
results, according to FactSet. That would mark the biggest decline
in earnings since the third quarter of 2009, though it's an
improvement from the expected earnings drop of 4.7% forecast in
late March.
U.S. economic data has been weak of late, contributing to weaker
quarterly results and a rockier stock market this year, said Kevin
Kelly, chief investment officer at Recon Capital Partners, which
manages about $200 million.
"The economic numbers certainly have been damaged, and that
story that we're doing so well is not as intact," Mr. Kelly said.
"You can see that in the market action this year, and you can see
that in the earnings."
Mr. Kelly said he remained invested in shares of large, dominant
technology companies. He said he boosted his stake in Google Inc.
earlier this year.
Shares of Wynn Resorts Ltd. fell 13% after the casino operator
said late Tuesday that it swung to a quarterly loss.
Shares of Akamai Technologies Inc. fell 2.6% after the
cloud-computing service firm reported first-quarter results that
fell short of its own forecast.
Northrop Grumman Corp. shares rose 0.5% after the defense
contractor said first-quarter profit fell 19% but results topped
expectations.
Starwood Hotels & Resorts Worldwide shares gained 7.8% after
the company announced it hired investment bank Lazard to explore
strategic alternatives, a move that could put the company up for
sale. The hotel operator also reported lower first-quarter
earnings.
Shares of Twitter fell 3.4%, extending Tuesday's decline of more
than 20% following the early release of disappointing first-quarter
results.
Biotechnology stocks rebounded. The Nasdaq Biotechnology Index
gained 0.3%, snapping a three-session slide.
In commodities markets, crude-oil futures rose 0.7% to $57.43 a
barrel. Gold futures fell 0.2% to $1211.80 an ounce.
The yield on the 10-year Treasury note rose to 2.042% as prices
fell.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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