Stock market today: US stocks tumble after Meta's reality check, soft GDP print

Stocks fell on Thursday after a sharply lower-than-expected reading on US GDP for the first quarter ratcheted up questions about the health of the US economy in the face of persistently high interest rates. Tech stocks led the way down as Meta’s (META) revenue forecast rattled investors eyeing the next high-stakes megacap earnings.

The Nasdaq Composite (^IXIC) fell roughly 1.3%. The S&P 500 (^GSPC) lost 0.9%, while the Dow Jones Industrial Average (^DJI) slipped 1.3%, or over 400 points.

US GDP growth came in at a 1.6% annualized pace in the first quarter, falling well short of expectations of 2.5%. The reading comes amid ongoing debate about the path of the Federal Reserve’s interest rate campaign.

Treasury yields rose after the GDP print, with the benchmark 10-year yield (^TNX) surging to its highest levels of the year. At last check, it was sitting around 4.73%.

Meanwhile, Meta shares sank as much as 15% as the market balked at rising costs at the Facebook and Instagram owner, which plans to spend up to $10 billion on AI infrastructure investments. Concerns grew about how long it will take for that spending to feed into revenue, pulling down tech stocks more broadly. Microsoft (MSFT), Alphabet (GOOGL, GOOG), and Amazon (AMZN) were all down more than 3%.

The Meta miss put a dent in hopes that results from the “Magnificent Seven” might juice a comeback in stocks, whose rally has lost momentum recently. It’s also a reality check for Microsoft and Google, also burdened with high earnings growth and AI expectations, as they report after the bell Thursday.

Caterpillar (CAT) shares also sank as much as 7% after the heavy equipment maker said it continues to see weakness in Europe and economic softening in the Asia-Pacific, excluding China.

On the macroeconomic front, the spotlight will turn to the March reading of the Personal Consumption Expenditures index, the Fed’s favored inflation gauge, set for release on Friday.

Live10 updates

Thu, April 25, 2024 at 5:59 PM GMT+2

Meta stock drops 10% or more. Here’s what happens next

Meta Platforms (META) is no stranger to outsized declines in its share price. It’s first one-day loss of 10% or more occurred the day after it listed on the Nasdaq in May 2012. It would take more than a year for the shares of (then-Facebook) to clime above its $38 IPO price.

In fact, including today, the company has only recorded seven drops of 10% or more — many of them after earnings.

META STOCK DROPS 10% OR MORE — WHAT’S NEXT?

On October 27, 2022, Meta sunk an eyewatering 25% after disappointing on Q3 earnings. Yet that was an excellent entry that yielded more than a 400% return into the April 2024 all-time closing high of $527.34. The stock had been down 65% from its July 2021 peak just prior to the fall.

Compare that to the even bigger decline of 26% on February 3, 2022, which occurred when the stock was only down 15% from recent highs. That was the biggest plumet in the company’s history, and it would take over two years to reach fresh records.

However, the stock has not rebounded so well when the stock price dropped relatively close to recent highs. Given Meta was only off about 6% from its high just prior to the report on Wednesday, history suggests that further downside is more likely than upside for this quite volatile stock.
Thu, April 25, 2024 at 5:55 PM GMT+2

Nvidia and Tesla rally while other tech stocks fall

Thursday’s sell-off on the Nasdaq Composite (IXIC) has been brutal, but a few stocks bucked the trend.

Namely chipmaker Nvidia (NVDA) and EV giant Tesla (TSLA), which were both up during the session.

Tesla shares were up 1.6% Thursday, after gaining roughly 10% on Wednesday in reaction to the company’s quarterly results.

Meanwhile Nvidia rose more than 2%.
Thu, April 25, 2024 at 5:09 PM GMT+2

Alphabet earnings preview: All eyes on AI investments, ad market growth as Meta disappoints

Yahoo Finance‘s Hamza Shaban reports:

Alphabet (GOOG, GOOGL) is set to release quarterly earnings after the bell on Thursday, continuing a big week for US tech giants coming off a punishing run on Wall Street. The company is expected to offer updates on the race to turn massive AI investments into new revenue streams and the state of the massive digital ad market.

Alphabet’s report will arrive a day after its advertising rival and Big Tech peer Meta (META) offered a downbeat Q2 forecast and noted that expenses for the year are growing and that it will take some time before AI investments generate significant revenue. Meta stock tumbled as much as 14% following the results.

Wall Street’s reaction underscored the high expectations investors reserve for the tech giants and signals that Google will also be closely scrutinized for any perceived misstep.

Read more here.
Thu, April 25, 2024 at 4:15 PM GMT+2

Caterpillar sinks 7% after earnings, management sees weakness in Europe, Asia-Pacific

Caterpillar (CAT) shares sank 7% on Thursday after the maker of heavy equipment gave disappointing second quarter guidance with commentary pointing to weakness outside the US.

Caterpillar posted an adjusted profit of $5.60 versus expectations of $5.13 for the first quarter of 2024. Revenue of $15.8 billion came in shy of the $16 billion anticipated by Wall Street. Caterpillar said it was able to adjust pricing to offset lower volumes during the three-month period.

For the second quarter, the company expects sales to be lower compared to the same period last year.

The industrial giant is seen as a bellwether for the overall economy since it sells heavy building and infrastructure equipment. During the earnings call, management said it foresees a weak economy continuing in Europe and softening economic conditions in the Asia-Pacific region, not including China.

Prior to Thursday’s slide, the stock was up more than 20% year to date, trading near record highs.
Thu, April 25, 2024 at 4:06 PM GMT+2

Whirlpool stock plunges on weak demand for appliances

Whirlpool stock sank 9% mid-morning after the company reported sales declined in Q1 amid weak demand for household appliances.

The company reported that sales of large appliances fell 3%, dragged down by an 8% drop in North America. The shaky appetite for home appliances comes as the US housing market has been at a standstill, with elevated mortgage rates keeping both buyers and sellers on the sidelines.

Mortgage rates have eclipsed 7% this year. Sales of existing homes pulled back last month, eroding demand for big ticker appliances, which are often purchased when people move.

However, Whirlpool remains bullish on the outlook for housing in the long term.

“Our positive view of the US housing market remains unchanged. Given the current undersupplying of 3 million to 4 million houses in the market, we remain very bullish on the trajectory of the housing sector and its medium- and long-term prospects,” Marc Bitzer, chief executive officer at Whirlpool, said on the earnings call.

“We’re clearly well positioned to benefit from a coming housing rebound given the high correlation between existing home sales and appliance sales,” Bitzer added.
Thu, April 25, 2024 at 3:32 PM GMT+2

Stocks sink at the open

Techs led a retreat in US stocks on Thursday as Meta’s (META) revenue forecast rattled investors eyeing the next high-stakes megacap earnings. Meanwhile, a sharply lower-than-expected reading on US GDP for the first quarter ratcheted up questions about the health of the US economy in the face of persistently high interest rates.

US GDP growth came in at a 1.6% annualized pace in the first quarter, falling well short of expectations of 2.5%. Meanwhile, the “core” Personal Consumption Expenditures index, which excludes the volatile food and energy categories, grew by 3.7% in the first quarter, above estimates for 3.4%, and significantly higher than 2% gain seen in the prior quarter.

The Nasdaq Composite (^IXIC) fell more than 2% on the heels of a go-nowhere day for the major Wall Street gauges. The S&P 500 (^GSPC) lost 1.3%, while those on the Dow Jones Industrial Average (^DJI) slipped 1.3%, or nearly 500 points.
Thu, April 25, 2024 at 12:45 PM GMT+2

JPMorgan makes a key point on Meta

Meta (META) is getting blasted premarket after earnings last night.

With good reason.

After spending 2023 promoting discipline on costs, CEO and founder Mark Zuckerberg and his teams are back to their free-spending ways. The material lift in capex guidance for this year and signals of even more aggressive spending in 2025 to support AI initiatives has rocked renewed investor confidence.

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

“We are encouraged that Meta’s success w/Llama 3 and Meta AI has increased management’s confidence in leading in AI, and we know that building out new products takes time, but comparisons to the scaling periods of Reels, Stories, and Feed into mobile will concern many investors, even as we can see those long-term payoffs.”
Thu, April 25, 2024 at 12:30 PM GMT+2

This one chart says it all on Chipotle

Chipotle (CMG) is a beast.

There is no other way to put it.

The company raises prices by 6% to 7% in California in response to the new $20-an-hour wage law, and consumers don’t push back. The company rolls out sweet and spicy chicken, consumers clamor for it. The company, at some locations, is pumping out 80 burrito bowls an hour at peak times — beyond impressive.

The one chart below from Bernstein captures nicely the growth story that Chipotle continues to be (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.

For more on Chipotle, tune into my chat with Chipotle CFO Jack Hartung today on Yahoo Finance around 9:45 a.m. ET.

There is Chipotle…and then there is everyone else. (Bernstein)
Thu, April 25, 2024 at 12:15 PM GMT+2

Watch the truckers and rails

It has been a rough earnings season for trucking and railroad companies.

Guidance has been terrible. Earnings call commentary has been terrible.

The question now for investors is if this commentary suggests an economic slowdown in the coming months, as trucking and rail companies are often seen as economic bellwethers.

Here is a good recap of what’s going on from the team at Jones Trading:

“The S&P 1500 Road & Rail industry group was down as much as 4% yesterday intraday before settling with a 3% decline. It has not been a secret that there is a trucking glut at the moment in the United States. Last week JB Hunt (JBHT) dropped sharply after reporting earnings and stating ‘we continue to face inflationary cost pressures, despite also facing deflationary pricing pressure.’

“Today it was Old Dominion Freight lines (ODFL). The company’s CFO stated that the past two years have felt like the 2009 recession and added that some competitors are taking shipments ‘for cost or less than their cost to operate, just to kind of keep the trucks rolling.’ The situation may be best summed up by Knight Swift (KNX), which negatively pre-announced last week and then today lowered guidance for the next two quarters.

The weakness has carried over to the rails, where in most cases the companies appeared to just miss forecasts on the top and bottom line. Norfolk Southern (NSC) noted ‘We expect continued mixed impacts from higher international empty shipments as geopolitical tensions remain elevated, but a weak truck market continues to drive stubbornly low truck rates, which will dampen domestic non-premium Intermodal pricing.’ A Canadian National Railway (CNI) executive noted ‘…I think everyone would understand with the truck capacity issues that are out there today, there’s a lot of surplus capacity. We’re expecting that overall within North America to decline as more and more shops, I’ll say, go bankrupt, and some of that capacity comes out of the market.’ Looking for bankruptcies, ouch. The executive did note that was the only area of pricing pressure it is seeing.”
Thu, April 25, 2024 at 12:00 PM GMT+2
IBM shares tank — here’s why, plus what the CFO told Yahoo Finance

Big Red.

Shares of IBM (IBM) — aka Big Blue — are getting slammed premarket after earnings last night. The Street mostly likes the company’s $6.4 billion HashiCorp deal. But lots of focus on the unchanged sales in the first quarter at IBM’s lucrative consulting business.

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

Kavanaugh on HashiCorp:

“The deal is a tremendous strategic fit to the new IBM of a hybrid cloud and AI company.”

“I think it will be a major transformational shift for IBM that is complementary and that drives the next leg of scale of Red Hat and IBM as a hybrid cloud platform.”

Kavanaugh on consulting business:

“We still see very good demand out in the marketplace around large transformational deals, digital transformation. We had our largest first quarter in consulting signings in many years. So the demand profile is out there. Our AI bookings for consulting in the first quarter doubled all of 2023. So there is very good demand in the marketplace. But what we’re seeing, just given the uncertain macroeconomic environment, is we’re seeing a tightening of discretionary spending, no different than Accenture and all the other consulting companies that are impacting the short term revenue realization.”