Wall Street futures shrug off weak US economic data

Wall Street futures held on to gains on Thursday while Treasuries sold off as fresh data showed US gross domestic product figures rose much less than expected in the first quarter.

Contracts tracking Wall Street’s benchmark S&P 500 rose 0.4 per cent, while those tracking the tech-heavy Nasdaq 100 were up 0.8 per cent ahead of the New York open.

The indices shrugged off news that US GDP rose at an annual rate of 1.1 per cent in the first quarter of the year, down from a 2.6 per cent rise in the final three months of 2022. Economists polled by Reuters had expected a rise of about 2 per cent.

US government bonds came under pressure following the economic growth data. The policy-sensitive two-year yield extended an earlier move to trade up 0.08 percentage points at 4 per cent. The 10-year yield, seen as a proxy for global borrowing costs, rose 0.05 percentage points to 3.48 per cent. Bond yields rise as their prices fall. A measure of the dollar against six other currencies added 0.2 per cent.

Economic growth is slowing but “isn’t yet collapsing”, said Andrew Hunter, deputy chief US economist at Capital Economics, who expects the drag from higher interest rates and tighter credit conditions caused by March’s banking panic to eventually push the US into a “mild” recession.

Traders on Thursday were also digesting earnings from some of the world’s largest technology companies, which have held up even as US interest rates have continued to climb. After solid results from Alphabet and Microsoft, Facebook parent Meta reported strong sales growth in the US, pushing shares up 11 per cent in pre-market trading.

The social media group expects revenue for the next quarter between $29.5bn and $32bn, above expectations.

The S&P 500 is down 1.3 per cent over the past month, having rallied in March even as three midsized banks failed. “I think we’re looking at downside for a while,” said Mike Zigmont, head of trading at Harvest Volatility Management.

“It’s not necessarily because the market is bad or the world is bad etc, it’s simply because the optimism from mid-March came out of nowhere and wasn’t vindicated by news or events. It was a speculative rally where the speculation was off,” he said.

First Republic shares slid for a third day on Wednesday, shedding almost 30 per cent after regulators and big banks held back from stepping in to help the San Francisco-based lender. Its shares plummeted this week after the bank revealed customers withdrew $100bn of deposits during March’s banking turmoil.

European stocks were steady on Thursday as investors waded through a host of first-quarter corporate earnings. The region-wide Stoxx 600 added less than 0.1 per cent, the FTSE 100 was flat and France’s Cac 40 index rose 0.4 per cent.

Shares of consumer goods giant Unilever rose 1.5 per cent after it reported record first-quarter revenue of €14.8bn, while shares in Deutsche Bank rose 1.6 per cent after the German lender said profit hit its highest in a decade in the first quarter.

Asian stocks rose, with China’s CSI 300 index up 0.7 per cent and Hong Kong’s Hang Seng index gaining 0.4 per cent.

Additional reporting by Harriet Clarfelt in New York