U.S. stocks retreat on weak economic progress and disappointing estimates from Meta Platforms


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U.S. stocks fell sharply on Thursday, weighed down by signs of slowing economic growth and disappointing second-quarter forecasts from technology giant Meta Platforms (META).

U.S. GDP growth in the first quarter disappoints

The U.S. economy grew by 1.6% in the first quarter on a year-over-year basis, according to data released on Thursday.

This growth marks a significant decrease from the 3.4% increase in the final quarter of 2023 and falls below the expected 2.5%. 

Wall Street indexes started the second quarter negatively, with losses intensifying last week due to signs of strong inflation and hawkish Federal Reserve comments, leading traders to abandon hopes for a June rate cut.

Given their focus on fighting inflation, Fed policymakers are unlikely to be swayed by this GDP release to start cutting rates as early as June, though it might increase the likelihood of a rate cut in the fall.

The likelihood of a fall rate cut will depend on the upcoming release of Friday’s PCE price index data, the Fed’s preferred measure of inflation.

According to data from the London Stock Exchange Group (LSEG), money markets now expect the Fed to cut interest rates by about 42 basis points this year, a decrease from the 150 basis points forecasted at the year’s start.

Meta plummets, sinking its tech peers 

Shares of Meta have plunged 14%, hitting near three-month lows, after the Facebook parent forecast lower-than-expected second-quarter revenue due to increased spending on artificial intelligence.

These estimates overshadowed stronger-than-expected first-quarter results and set a somber tone for upcoming earnings from major tech companies such as Microsoft (MSFT) and Alphabet (GOOGL).

Microsoft and Alphabet are scheduled to release their first-quarter results this Thursday.  Social networking stocks Snap (SNAP) and Pinterest (PINS) also experienced significant losses, mirroring Meta’s decline. 

IBM’s stock fell 9% due to poor first-quarter results, coinciding with its announcement of a $6.4 billion deal to acquire Hashicorp (HCP). 

Caterpillar (CAT) shares fell 8% after the company reported mixed results for the first quarter of 2024; its earnings exceeded analysts’ expectations, but revenue fell short.

On the other hand, Ford (F) shares rose 1% due to strong first-quarter results and positive guidance, while Chipotle Mexican Grill (CMG) gained 2.3% after beating estimates with its first-quarter results.

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