Investing.com – U.S. stocks fell sharply on Thursday as investors were hit by a combination of slowing economic growth and disappointing second-quarter guidance from tech heavyweight Meta Platforms (NASDAQ:).
At 09:35 ET (1335 GMT), the decline was 460 points, or 1.2%, the decline was 70 points, or 1.4%, and the decline was 350 points, or 2.2%.
US GDP growth in the first quarter disappointed
Year-on-year growth in the first quarter was just 1.6%, according to data released earlier Thursday.
This represents a significant drop from the 3.4% growth seen in the final quarter of 2023 and below the 2.5% growth expected.
Wall Street indexes got off to a negative start to the second quarter, with losses extending last week as signs of hot inflation and hawkish comments from the Federal Reserve caused traders to re-evaluate most expectations for an interest rate cut in June.
This GDP report is unlikely to convince Fed officials to begin a rate-cut cycle as soon as June, given that fighting inflation has been their main agenda, but it could make a rate cut in the fall more likely.
That could depend on Friday’s data, as it is widely considered the Federal Reserve’s favorite indicator of inflation.
Money markets expect the Fed to cut rates this year by about 42 basis points, down from about 150 basis points seen at the start of the year, according to LSEG data.
Meta-recession drags down tech peers
In the enterprise sector, Meta shares fell 14% to a nearly three-month low after parent company Facebook forecast weaker-than-expected second-quarter earnings due to higher artificial intelligence costs.
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The guidance largely offset better-than-expected first-quarter earnings and set a gloomy tone for upcoming earnings from the company’s biggest tech companies, particularly Microsoft (NASDAQ:) and Alphabet (NASDAQ:).
Microsoft and Alphabet are set to report their first-quarter earnings after the bell on Thursday.
Social media shares Snap (NYSE:) and Pinterest (NYSE:) also posted sharp losses, following Meta’s decline.
IBM (NYSE:) fell 9% due to weak first-quarter earnings, and the company also announced a deal to buy Hashicorp (NASDAQ:) worth $6.4 billion.
Caterpillar Shares (NYSE:) fell 8% after the heavy machinery maker reported mixed results in the first quarter of 2024, with earnings beating analysts’ expectations but revenue missing.
On the other hand, Ford (NYSE:) shares rose 1% on strong first-quarter earnings and positive guidance, while Chipotle Mexican Grill (NYSE:) shares rose 2.3% after the company beat earnings expectations in first quarter.
Oil rose only against the backdrop of falling oil reserves
Oil prices rose on Thursday, recovering from losses in the previous session, as traders digested the latest data on growth and inventories.
By 09:35 ET, U.S. crude futures were trading 0.1% higher at $82.91 a barrel, while the Brent contract was up 0.1% at $88.13 a barrel.
Data from the U.S. Energy Information Administration on Wednesday showed gasoline inventories fell less than expected, while distillate inventories rose, defying expectations for a decline, reflecting signs of slowing demand.
However, it fell by more than six million barrels, while an increase of about 1.6 million barrels was expected.
Additionally, gold futures rose 0.4% to $2,328.60 an ounce, while EUR/USD traded 0.1% lower at 1.0687.
(Ambar Warrick contributed to this article.)
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