Stock Market Today: US Stocks Fall After Meta's Reality Check, Weak GDP Numbers

Stock Market Today: US Stocks Fall After Meta’s Reality Check, Weak GDP Numbers

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Techs led a decline in U.S. stocks on Thursday as Meta (META) revenue forecast unsettled investors waiting for the next high-stakes mega-cap gains. Meanwhile, a significantly lower-than-expected first-quarter U.S. GDP figure raised questions about the health of the U.S. economy given persistently high interest rates.

The Nasdaq Composite (^IXIC) fell more than 2% after key Wall Street indicators failed. The S&P 500 (^GSPC) fell 1.3%, while the Dow Jones Industrial Average (^DJI) fell 1.3%, or nearly 500 points

Meta shares fell nearly 15% as the market bristled at rising costs from the Facebook and Instagram owner, who plans to spend up to $10 billion in AI infrastructure investments. Concerns grew about how long it will take for those expenses to be reflected in sales, which would drag down tech stocks overall.

That miss dampened hopes that the Magnificent Seven’s results could lead to a comeback for stocks whose rally has lost momentum of late. It’s also a reality check for Microsoft (MSFT) and Alphabet (GOOGL, GOOG), which are also saddled with high earnings growth and AI expectations when they report after the market close on Thursday.

Meanwhile, U.S. GDP growth was 1.6% annualized in the first quarter, well below expectations of 2.5%. The reading comes amid ongoing debate over the path of the Federal Reserve’s interest rate campaign.

Treasury yields rose after the GDP release, with the benchmark 10-year Treasury yield (^TNX) rising to 4.72%, its highest level of the year.

On the macroeconomic front, the focus will be on the March reading of the Personal Consumption Expenditure Index, the Fed’s preferred inflation indicator, which is scheduled to be released on Friday.

live5 updates

  • Stocks fall at open

    Techs led a decline in U.S. stocks on Thursday as Meta (META) revenue forecast unsettled investors waiting for the next high-stakes megacap gains. Meanwhile, a significantly lower-than-expected first-quarter U.S. GDP figure raised questions about the health of the U.S. economy given persistently high interest rates.

    U.S. GDP growth was an annualized 1.6% in the first quarter, well below expectations of 2.5%. Meanwhile, the “core” personal consumption spending index, which excludes the volatile food and energy categories, grew 3.7% in the first quarter, above estimates of 3.4% and significantly higher than the 2% gain in the previous quarter.

    The Nasdaq Composite (^IXIC) fell more than 2% after key Wall Street indicators failed. The S&P 500 (^GSPC) fell 1.3%, while the Dow Jones Industrial Average (^DJI) fell 1.3%, or nearly 500 points.

  • JP Morgan makes an important point about meta

    Meta (META) is getting blown up premarket after last night’s results.

    For good reason.

    After spending 2023 promoting cost discipline, CEO and founder Mark Zuckerberg and his teams have returned to their free-spending ways. The significant increase in investment guidance for this year and signs of even more aggressive spending in 2025 to support AI initiatives have once again shaken investor confidence.

    JP Morgan analyst Doug Anmuth makes an important point in a note this morning:

    “We are encouraged that Meta’s success with Llama 3 and Meta AI has increased management’s confidence in AI leadership, and we know that new product development takes time, but comparisons to the scaling periods of Reels, Stories “And feeds into mobile devices will show it.” worry many investors, even if we can see these long-term benefits.”

  • This one chart says it all about Chipotle

    Chipotle (CMG) is a beast.

    There is no other way to put it.

    The company is raising prices by 6% to 7% in California in response to the new $20 hourly wage law, and consumers aren’t fighting back. The company launches sweet and spicy chicken, and consumers demand it. At some locations, the company produces 80 burrito bowls per hour at peak times, which is beyond impressive.

    The following graphic from Bernstein captures Chipotle’s growth story well (more on that here in my interview with Chipotle CEO Brian Niccol).

    All in all, the stock deserves to trade higher today after last night’s results.

    If you’d like to learn more about Chipotle, check out my chat with Chipotle CFO Jack Hartung on Yahoo Finance Live today at around 9:45 a.m. ET.

    There's Chipotle... and then there's everyone else.There's Chipotle... and then there's everyone else.

    There’s Chipotle… and then there’s everyone else. (Amber)

  • Watch the truckers and rails

    It’s been a tough earnings season for trucking companies and railroads.

    The instructions were terrible. The comments on the earnings call were terrible.

    The question for investors now arises as to whether this comment indicates an economic slowdown in the coming months – trucking companies and railway companies are often considered economic indicators.

    Good summary of current developments from the team at Jones Trading:

    “The S&P 1500 Road & Rail industry group lost up to 4% intraday yesterday before settling at a 3% decline. It’s no secret that there is currently an oversupply of trucking in the United States. Last week, JB Hunt (JBHT) fell sharply after reporting earnings and declaring, “We continue to face inflationary cost pressures, although we also face deflationary pricing pressures.” Today it was Old Dominion Freight Lines (ODFL). The company’s CFO said the last two years have felt like the 2009 recession, adding that some competitors are taking deliveries “at cost or less than operating cost” just to somehow keep the trucks running. The situation is best summed up by Knight Swift (KNX), which made a negative advance announcement last week and then today lowered guidance for the next two quarters. The weakness has spread to the rails, where in most cases companies appear to have narrowly missed sales and profit forecasts. Norfolk Southern (NSC) noted: “We expect rising international empty loads to continue to have a mixed impact as geopolitical tensions remain high, but a weak trucking market continues to result in stubbornly low trucking rates, weighing on domestic intermodal non-premium pricing.” A Canadian National Railway (CNI) executive noted: “…I think everyone would understand that given today’s trucking capacity issues, there is a lot of excess capacity I would say , more stores go bankrupt, and some of that capacity is taken away from the market. Looking for bankruptcies, ouch. The executive noted that this is the only price pressure they are seeing.

  • The IBM stock price drop – here’s why and what the CFO told Yahoo Finance

    Big red.

    Shares of IBM (IBM) – also known as Big Blue – are coming under heavy pressure in the premarket last night following its results. The Street particularly likes the company’s $6.4 billion HashiCorp deal. But much attention is focused on the unchanged first-quarter sales of IBM’s lucrative consulting business.

    Here’s what Jim Kavanaugh, IBM’s CFO, told me about the HashiCorp deal and the softness in advice.

    Kavanaugh on HashiCorp:

    • “The deal is an excellent strategic complement to IBM’s new hybrid cloud and AI company.”

    • “I think it will be a major transformation for IBM that is complementary and drives the next level of scaling of Red Hat and IBM as a hybrid cloud platform.”

    Kavanaugh on the consulting business:

    • “We continue to see very good demand in the market for large transformation deals and digital transformation. We had the largest first quarter of consulting contracts in many years. So the demand profile is there. Our AI bookings for advice doubled in the first quarter throughout 2023. So there is a very good demand in the market. However, what we are seeing right now given the uncertain macroeconomic environment is a tightening of discretionary spending, not unlike Accenture and all other consulting firms impacting near-term revenue recognition.”

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