Stocks decline as GDP report raises fears of recession

A man stares down at his cellphone as the stock exchange building in New York is visible in the background.

File photo: Pedestrians walk past the New York Stock Exchange, July 8, 2022, in New York. Stocks are opening slightly higher on Wall Street Thursday, July 28, 2022 following news the U.S. economy shrank for a second consecutive quarter. The S&P 500, Dow Jones Industrial Average and Nasdaq are each up a fraction of a percent. (AP Photo/John Minchillo, file)

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

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

The U.S. 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. Consecutive quarters of falling GDP constitute an informal, though not definitive, indicator of a recession.

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The GDP report for last quarter pointed to weakness across the economy. 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 U.S. 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.

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 U.S. regulators. The agreement comes a day after Spirit’s attempt to merge with Frontier Airlines fell apart.

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