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US economic growth regains steam in Q2; inflation slows

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Ford slumps as higher costs, EV unit dent profit growth

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IBM gets lift from software, AI demand as consulting slips

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American Airlines ( AAL ) recovers ground

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Indexes: Dow up 0.28%, S&P down 0.08%, Nasdaq down 0.44%

(Updated at 9:46 a.m. ET/ 1346 GMT)

By Ankika Biswas and Lisa Pauline Mattackal

July 25 (Reuters) -

Wall Street's main indexes were mixed on Thursday as

investors assessed stronger-than-expected GDP data and remained

cautious after suffering a tech mauling in the previous session.

Data showed the

U.S. economy

expanded 2.8% in the second quarter versus estimates of 2%,

but inflation subsided, leaving intact expectations of a

September rate cut.

"The growth rate was higher than what we were looking

for, but the good news is that the economy expanded as consumers

spent more as inflation dropped in the second quarter," said

Peter Cardillo, chief market economist at Spartan Capital

Securities.

"This is a good sign in terms of the economy."

Megacap stocks were mixed, after lackluster earnings

from Alphabet and Tesla pummeled the

so-called "Magnificent Seven" group of tech stocks in the

previous session. The Nasdaq and the S&P 500 saw

their worst day since 2022 in the selloff.

On Thursday, Nvidia ( NVDA ), Alphabet and

Microsoft ( MSFT ) slipped between 0.4% and 0.9%, while Tesla

rebounded 2.6% after a 12% slump a day earlier.

Semiconductor stocks also broadly fell, led by a 13%

tumble in Teradyne ( TER ) after the chip-testing equipment

maker

forecast

lower-than-expected third-quarter revenue. The

semiconductor index lost 1.6%.

While the group of heavyweight stocks has powered the

stock market to all-time highs this year, Wednesday's selloff

added weight to fears that these stocks might be over-stretched

and in for more turbulence.

"There is so much pull ahead in terms of share prices,

earnings forecasts with AI that we are seeing some fatigue

setting in," said Jake Dollarhide, chief executive officer at

Longbow Asset Management.

The small-cap Russell 2000 outperformed, rising

0.7% after a 2% slump in the prior session, as investors now see

more value in shifting to lagging sectors.

Wall Street's "fear gauge" eased slightly, but

hovered around its highest since April 19.

Investors are awaiting the personal consumption

expenditures (PCE) price data, due on Friday, to confirm bets of

an early start to the Federal Reserve's rate cuts after the

recent trend of easing inflation and some weakness in the labor

market.

Bets of a 25-basis-point cut in September ticked up to

nearly 88% from around 78% prior to Thursday's data, as per

CME's FedWatch Tool.

Market participants are also pricing in at least two

rate cuts by December this year, according to LSEG data.

At 9:46 a.m. ET, the Dow Jones Industrial Average

was up 111.84 points, or 0.28%, at 39,965.71, the S&P 500

was down 4.15 points, or 0.08%, at 5,422.98, and the

Nasdaq Composite was down 76.93 points, or 0.44%, at

17,265.48.

Among earnings-driven moves, Ford slumped 17.2% after

the automaker's second-quarter adjusted profit missed estimates

by a wide margin, while American Airlines ( AAL ) rose 4.5%,

reversing premarket losses after cutting its annual profit

forecast.

Edwards Lifesciences ( EW ) tumbled 23.8%, the biggest

decliner on the S&P 500, after missing second-quarter revenue

estimates.

Advancing issues outnumbered decliners by a 1.84-to-1 ratio

on the NYSE and by a 1.52-to-1 ratio on the Nasdaq.

The S&P index recorded 25 new 52-week highs and 8 new lows,

while the Nasdaq recorded 45 new highs and 37 new lows.