Technology stocks led a decline in U.S. stocks Thursday as earnings forecasts from Meta (META) jolted investors eyeing upcoming earnings from high-stakes megacaps. At the same time, a significantly lower-than-expected U.S. GDP figure for the first quarter increased questions about the health of the U.S. economy in the face of persistently high interest rates.
The Nasdaq Composite (^IXIC) fell more than 2% on the heels of a down day for Wall Street’s main indicators. The S&P 500 (^GSPC) lost 1.3%, while the Dow Jones Industrial Average (^DJI) slipped 1.3%, or nearly 500 points.
Meta shares fell nearly 15% as the market balked over rising costs from the Facebook and Instagram owner, which plans to spend up to $10 billion on AI infrastructure investments. Concerns have grown about how long it will take for that spending to translate into revenue, leading to a broader decline in tech stocks.
This failure undermined hopes that the results of the “Magnificent Seven” could encourage a comeback in stocks, whose recovery has lost momentum recently. It’s also a reality check for Microsoft (MSFT) and Alphabet (GOOGL, GOOG), also facing high profit growth and AI expectations, when they report earnings after the bell on Thursday .
At the same time, U.S. GDP growth came in at an annualized rate of 1.6% in the first quarter, well below expectations of 2.5%. The reading comes amid an ongoing debate over the direction of the Federal Reserve’s interest rate campaign.
Treasury yields rose after the GDP release, with the benchmark 10-year yield (^TNX) climbing to 4.72%, its highest of the year.
On the macroeconomic front, the spotlight will be on March’s reading of the Personal Consumption Expenditures Index, the Fed’s preferred inflation gauge, scheduled for release Friday.
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