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Dow closes nearly 200 points higher on better-than-expected GDP report, Nasdaq falls as Meta shares plunge

Maley: We are finally seeing the delayed effect of the Fed's policy tightening on the economy

The Dow Jones Industrial Average closed higher on Thursday after new data showed third-quarter GDP grew faster than expected and suggested easing inflation, encouraging investors to buy stocks linked to the health of the economy.

The Dow climbed 194.17 points, or 0.6%, to end at 32,033.28 for its fifth day of gains. Shares in Caterpillar, McDonald’s and Honeywell led the 30-stock index higher after the companies reported better-than-expected earnings. The Dow traded up as much as 549 points during the day.

The S&P 500 closed down 0.6%, ending the session at 3,807.30. The Nasdaq Composite lost 1.6%, ending at 10,792.67, as a rout in Meta and other tech stocks weighed on the index.

The US economy grew at a 2.6% annual pace for the period, against the Dow Jones estimate of 2.3% growth, the Bureau of Economic Analysis report showed. The chain-weighted price index, a cost-of-living measure adjusted to reflect changing consumer behavior, rose 4.1% for the quarter, well below estimates of 5.3%. Headline inflation rose 4.2%, down sharply from 7.3%, according to a gauge the Federal Reserve uses.

That gave hope to market watchers looking for data indicating inflation was easing, which could lead the Federal Reserve to ease rate hikes after its November meeting, said Cliff Hodge, chief investment officer at Cornerstone Wealth. Bond yields also retreated following the release of the data.

“The GDP release this morning was a golden number for risk assets,” said Hodge, who specifically noted the price index data. “This is yet another sign that points to the likelihood that the worst of inflation may be behind us.”

Still, the tech sector continued its recent woes, holding back the broader stock market. Meta shares fell 24.6% on a weak forecast for the fourth quarter and disappointing results for the third quarter on Wednesday. The company also said it would lose even more money next year building out the metaverse. The report led to several analysts downgrading the share.

Correction: The Dow was up a whopping 549 points. An earlier version had the number wrong.

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