Tech giants sold off late in the day after Meta Platforms Inc.’s disappointing outlook raised concerns about whether the artificial intelligence euphoria that fueled the bull market had gone too far far.
A $250 billion exchange-traded fund that tracks the Nasdaq 100 Index (ticker: QQQ) took a hit when Facebook’s parent company fell more than 10 percent after raising its spending estimates for the year and projected sales below analyst expectations. Heading into the results, stocks struggled to gain ground as traders positioned themselves for economic data that will help shape views on the Federal Reserve’s next steps.
For Nationwide’s Mark Hackett, although the cohort of seven mega-cap tech stocks have performed well over the past two years due to their earnings growth exceeding that of the broader market, this advantage could diminish in 2024 and even more significantly in 2025.
“The Magnificent Seven are no longer as powerful as they once were, and this broadening market creates pockets of opportunity for the rest of the S&P 500,” he noted. “We view this as a positive development for investors looking to diversify away from recent market leaders,” he added.
The S&P 500 closed slightly above 5,070. Tesla Inc. jumped 12 percent after Elon Musk pledged to launch cheaper vehicles. Nvidia Corp. fell more than 3 percent, ending a two-day rally. Yields on the 10-year Treasury rose four basis points to 4.64 percent. The yen weakened beyond 155 to the dollar, fueling nervousness over intervention.
Meta reported first-quarter revenue of $36.5 billion, an increase of more than 27 percent from the same period last year. This is a slight excess since analysts were expecting a turnover of $36.1 billion on average, according to estimates compiled by Bloomberg. Profit more than doubled to $12.4 billion, or earnings per share of $4.71.
But the Menlo Park, Calif.-based social media company also expects revenue between $36.5 billion and $39 billion for the second quarter. Analysts expected $38.2 billion.
For Katrina Dudley of Franklin Templeton, valuations are fair: companies must therefore continue to generate profit growth.
“For the overall market, we will be watching the forecast,” said Matt Palazzolo of Bernstein Private Wealth Management. “While it is good to know how businesses performed between January and March, it is now more important to have an idea of executives’ expectations for the rest of the year.”
Interest rates staying high for longer, along with economic uncertainty and geopolitical unrest have diminished the appeal of some of the stock market’s cheaper strategies.
This month, investors withdrew some $200 million from value-based exchange-traded funds, according to data compiled by Bloomberg Intelligence. In contrast, growth stocks have attracted more than $3 billion in capital flows – despite a fragile stock market that raises fears of further declines to come. This decline in interest in cheap stocks follows the lackluster performance of common value products.
Meanwhile, a JPMorgan Chase & Co. indicator is issuing a resounding buy signal on U.S. stocks, after hitting a threshold that typically precedes above-average gains.
The bank’s U.S. Tactical Positioning Index has reached a level that reflects an “attractive setup” for the S&P 500, according to a team led by Andrew Tyler, head of U.S. market intelligence at JPMorgan.
The stock index has historically gained about 3 percent over the next 20 days after a similar four-week positioning change, compared with a gain of about 1 percent in all periods, according to the note.
Company strengths:
- Boeing Co. CEO Dave Calhoun said the struggling planemaker is making progress toward turning around production and will hit its mid-decade cash flow target even after reporting an exit significant capital flow during the first three months of the year when it slows down. to go out
- Auditors at B. Riley Financial Inc. approved its annual report, while flagging concerns about weak internal controls.
- Investments from Amazon.com Inc. and Microsoft Corp. in artificial intelligence startups will face further scrutiny from the UK’s antitrust watchdog.
- AT&T Inc. beat analysts’ estimates for first-quarter profit as it added more wireless phone customers than expected.
- Biogen Inc. reported better-than-expected first-quarter profit as the biotech giant’s new Alzheimer’s drug Leqembi gained traction and cost cuts took hold.
- Visa Inc. reported quarterly profit that beat Wall Street forecasts as U.S. credit card spending rose.
- Humana Inc. withdrew its guidance for next year due to growing pressures in its Medicare business.
- Hasbro Inc. reported first-quarter earnings that beat estimates, a promising sign for the company’s turnaround efforts.
- Mattel Inc. reported a smaller-than-expected first-quarter loss, benefiting from rapid sales of its Hot Wheels toy cars and lower costs.
- Citigroup Inc. turned bearish on Molson Coors Beverage Co., expecting sales trends to weaken as the benefits of last year’s Bud Light boycott fade.
- SunPower Corp. will eliminate more than 25 percent of its workforce as the company faces a prolonged downturn in the rooftop solar industry.
Key events this week:
- US GDP, wholesale stocks, initial jobless claims, Thursday
- Results from Microsoft, Alphabet, Airbus, Thursday
- Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday
- US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
- Exxon Mobil, Chevron results, Friday
Some of the main market movements:
Actions
- The S&P 500 was little changed as of 4 p.m. New York time
- The Nasdaq 100 rose 0.3 percent
- The Dow Jones Industrial Average fell 0.1 percent
- The MSCI World index rose 0.2 percent
Currencies
- The Bloomberg Dollar Spot Index rose 0.1 percent
- The euro remained unchanged at $1.0701
- Sterling rose 0.1 percent to $1.2464.
- The Japanese yen fell 0.3 percent to 155.30 per dollar.
Cryptocurrencies
- Bitcoin fell 3.6 percent to $63,938.36
- Ether fell 2.4 percent to $3,133.35
Obligations
- The yield on the 10-year Treasury note rose four basis points to 4.64 percent.
- The German 10-year yield rose nine basis points to 2.59 percent
- The UK 10-year yield rose nine basis points to 4.33 percent
Raw materials
- West Texas Intermediate crude fell 0.5% to $82.93 a barrel.
- Spot gold fell 0.1 percent to $2,319.55 an ounce