Author of the article:
Amruta Khandekar and Shreyashi Sanyal
The Dow and the S&P 500 were set to open higher on Thursday after data showed U.S. economic growth rebounded in the third quarter, keeping at bay worries about an imminent recession fueled by aggressive monetary policy tightening.
The U.S. Commerce Department said gross domestic product increased at a 2.6% annualized rate last quarter, above expectations of a 2.4% rise, in its advance GDP estimate.
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The report showed an end to two straight quarterly decreases in output, which had raised concerns that the U.S. economy was in recession. The core PCE price index, a key inflation metric, rose in line with expectations and showed a decline from the second quarter.
“What we’re seeing is an economy that has snapped back from two quarters of negative GDP, and it’s probably opened the debate as to whether or not the economy was in recession in the first two quarters of the year,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“It raises the possibility of one more rate hike in December and then a pause.”
Meanwhile, Facebook-parent Meta Platforms Inc fell 22.7% in premarket trading, as it posted a drop in third-quarter profit and forecast a weak holiday quarter.
Analysts have set the bar low for the third-quarter reporting season, with aggregate S&P 500 profit growth now seen at 2.3% year-on-year, compared with 4.5% at the start of the month, according to Refinitiv data.
Data scheduled for Friday is expected show the Fed’s preferred measure of inflation continued to run at roughly three times the U.S. central bank’s annual target last month.
Futures tracking the blue-chip Dow rose amid a handful of positive earnings reports.
Caterpillar Inc jumped 4.9% after the heavy-equipment maker posted a rise in third-quarter profit, while McDonald’s Corp added 2.5% on beating quarterly comparable sales estimates.
Merck & Co Inc rose 1.6%, while Honeywell International Inc climbed 4.4% as both companies reported better-than-expected third-quarter earnings.
Shares of Amazon.com Inc were down 1.7%, while Apple Inc fell 0.5%. Both the companies are due to report results later on Thursday.
At 8:59 a.m. ET, Dow e-minis were up 334 points, or 1.05%, S&P 500 e-minis were up 14.25 points, or 0.37%, and Nasdaq 100 e-minis were down 11.75 points, or 0.1%. (Reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru; Additional reporting by Stephen Culp; Editing by Shounak Dasgupta)