On Thursday local time, the first quarter GDP data of the United States was significantly lower than expected, and the three major stock indexes of the US stock market collectively closed lower. As of the close, the Dow Jones Industrial Average fell 0.98%, the Nasdaq fell 0.64%, and the S&P 500 index fell 0.46%.
The financial report of Meta Platforms has raised concerns about the performance of technology stocks. Meta fell more than 10%, IBM fell more than 8%, Microsoft fell more than 2%, Google fell nearly 2%, Amazon and SAP fell more than 1%, Cisco, Qualcomm, and Micron Technology fell slightly.
The US stock market saw a sharp decline across the board
On Thursday local time, the first quarter GDP data of the United States was significantly lower than expected, and the three major stock indexes of the US stock market collectively closed lower. As of the close, the Dow Jones Industrial Average fell 375.12 points, a decrease of 0.98%, to 38085.80 points; The Nasdaq fell 100.99 points, a decrease of 0.64%, to 15611.76 points; The S&P 500 index fell 23.21 points, or 0.46%, to 5048.42 points.
The yield of US treasury bond bonds climbed on Thursday, and the yield of 10-year treasury bond rose 6.7 basis points to 4.721%, the highest of 4.739%. The yield of two-year treasury bond once exceeded the 5% threshold, reaching 5.027% at the highest.
According to data released by the US Department of Commerce, the annualized quarter on quarter growth of real GDP in the first quarter of the United States was 1.6%, far below market expectations of 2.5% and significantly slowing down from 3.4% in the fourth quarter of last year.
In terms of quarterly inflation data released at the same time, personal consumption expenditure (PCE) increased by 2.5% on an annualized quarter on quarter basis from the initial value, significantly slowing down from the previous 3.3% and also falling short of the expected 3%; The core PCE price index, excluding food and energy, saw an annualized quarter on quarter growth of 3.7%, exceeding expectations by 3.4% and almost double the previous 2%, marking the first quarterly growth in a year. Core inflation remains stubborn.
Analysis indicates that GDP data shows a significant slowdown in the US economy in the first quarter, due to intensified inflation and cooling consumer and government spending.
The US Department of Labor reported that the number of initial claims for unemployment benefits last week was 207000, with an estimated 215000, compared to the previous value of 212000.
An investor said that if inflation continues to remain high, disappointing US GDP data may mean that the stock market will face trouble.
"This report is the worst of the two worlds: economic growth is slowing down and inflationary pressures persist," wrote Chris Zaccarelli, head of investment at Independent Advisor Alliance.
"The Federal Reserve wants to see inflation continue to decline, but the market wants to see economic growth and increased corporate profits, so if both are not moving in the right direction, it will be bad news for the market," he continued.
After the release of GDP data, traders lowered their expectations for the Federal Reserve to relax monetary policy. According to data from the CME Federal Reserve Watch Tool, traders currently expect only one rate cut this year.
Stewart Cole, Chief Macro Economist at Equiti Capital, stated that the market's response to PCE data is greater than the expected GDP data. Today's data is very interesting. If the GDP data is confirmed in subsequent revisions, it will indicate that under the monetary tightening policy implemented by the Federal Reserve, the US economy has finally begun to slow down, which in turn may lead to a decrease in labor demand and downward pressure on wages. But the Federal Reserve may pay more attention to PCE data, which suggests that the process of bringing inflation back to its target is still far from winning. Overall, today's data may further push the Federal Reserve to cut interest rates.
Meta fell more than 10%
In terms of sectors, the eleven major sectors of the S&P 500 index fell six times and rose five times. Communication services and healthcare led the decline with 4.02% and 0.62% respectively, while the materials and energy sectors led the rise with 0.69% and 0.5% respectively.
Large technology stocks such as Microsoft and Google's parent company Alphabet will release their financial reports after Thursday's close, and the financial reports of Meta Platforms have raised concerns about the performance of technology stocks. Meta fell more than 10%, IBM fell more than 8%, Microsoft fell more than 2%, Google fell nearly 2%, Amazon and SAP fell more than 1%, Cisco, Qualcomm, and Micron Technology fell slightly; Tesla rose more than 4%, NVIDIA rose more than 3%, TSMC rose more than 2%, Intel, Netflix, and Chaowei Semiconductor rose more than 1%, and Apple rose slightly.
Meta fell 10.56%. On the news side, Meta's first quarter revenue was $36.46 billion, higher than the expected $36.12 billion, a 27% year-on-year increase, marking the fifth consecutive quarter of accelerated growth and the fastest expansion rate in three years since 2021.
The company expects its second quarter revenue to be between $36.5 billion and $39 billion, with the median lower than the market's expected $38.24 billion, equivalent to a year-on-year growth of 18%. In addition, Meta will increase its annual capital expenditure from its previous forecast of $30 billion to $37 billion to $35 billion to $40 billion, and it is expected to continue increasing expenditure next year.
Meta CEO Zuckerberg stated that Meta should significantly increase investment in the coming years to build more advanced models and the world's largest artificial intelligence services. Before we can generate significant revenue from these new products, these expenses must grow meaningfully.
A consultant to the European Supreme Court has warned that according to the EU's data protection rules manual, Meta's social media platform Facebook should be prohibited from using public information related to user sexual orientation for targeted advertising. This latest news can be said to be another bearish news for Meta, following the unexpected performance outlook that hit the stock price hard.
Citigroup has lowered its Meta target price from $590 to $550.
IBM fell by 8.25%, with a revenue of $14.462 billion in the first quarter, a year-on-year increase of 1%. Excluding the impact of exchange rate fluctuations, the company experienced a year-on-year increase of 3%; The net profit was 1.605 billion US dollars, a significant increase from 927 million US dollars in the same period last year; The net profit from continuing operations was $1.575 billion, an increase of 69% compared to $934 million in the same period last year.
IBM's first quarter adjusted earnings per share exceeded Wall Street analysts' expectations, but revenue did not meet expectations. In addition, IBM announced in a statement that it plans to acquire cloud software developer HashiCorp for $35 per share, in cash, with a valuation of $6.4 billion for the latter. IBM stated that it expects the transaction to be completed by the end of 2024 and will generate a gain in its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in the first year after the transaction is completed.
Micron Technology, the largest computer storage chip manufacturer in the United States, fell 0.18% to $111.58. On the news front, some media reported that Micron Technology has received a total of $13.6 billion in US government funding and loans. Due to the fact that the news had already been reported by multiple media outlets, it did not have much impact on the stock price of Micron, but the increase was as high as 30% this year.
Nvidia rose 3.71% as the company announced a final agreement to acquire Run: ai, with an estimated transaction price of approximately $700 million. The data shows that Run: AI has approximately 150 employees and has raised a total of 118 million US dollars. In addition, Nvidia has also acquired Deci, a company with approximately 100 employees, which has raised a total of $55 million in financing. The transaction between Nvidia and Deci has not been publicly disclosed, and the transaction price is unknown.
Tesla closed up 4.97%. Tesla recently announced a first quarter revenue of $21.3 billion (approximately RMB 154.3 billion) and a quarterly non GAAP net profit of $1.5 billion (approximately RMB 10.9 billion). Due to lower than expected delivery in the first quarter, Tesla CEO Elon Musk revealed during a earnings conference call that he will accelerate the launch of new models, which will be available as early as the end of 2024.
Apple rose 0.51% after recently releasing the OpenELM big model on the AI code community HuggingFace. This model is a series of open-source large-scale language models with different parameter sizes that can be run on end-to-end devices. It is understood that this series of models includes four different parameter versions, namely 270 million, 450 million, 1.1 billion, and 3 billion. Due to their small parameters, these models can run independently on end-to-end devices without the need to connect to cloud servers.
During a recent earnings conference call, Zuckerberg seemed to be criticizing Apple's MR headset Vision Pro.
Zuckerberg stated that augmented reality (AR) glasses, including Vision Pro, will not be successful in the mainstream market until they are finally equipped with a holographic display screen. This statement seems to indicate that Zuckerberg is skeptical about the success of products like Apple's Vision Pro.
Zuckerberg said, "I still believe that AR glasses equipped with holographic displays will be a cool thing and a long-term mature form of the product. But now, it seems clear that fashion AI glasses without displays are a meaningful market."
Novo Nordisk fell 0.29%. On the news, Bernie Sanders, Chairman of the US Senate Health, Education, Labor, and Pensions Committee, stated on Wednesday that the committee is investigating the pricing of Novo Nordisk. In a letter sent to the CEO of Novo Nordisk on Wednesday, Sanders requested that Novo Nordisk provide internal communication on the pricing of the drug in the United States, and explain why Ozempic and Wegovy have the same ingredients (both of which are semaglutide), while Wegovy's pricing is significantly higher. Sanders emphasized that the price of GLP-1 drugs must be lowered so that consumers can purchase them, and the government will not go bankrupt due to reimbursement of these drugs.
Bank stocks mostly fell, with KeyCorp and Zion Bank falling more than 2%, Arles Western Bank falling more than 1%, and First Horizon Bank and American Commercial Bank slightly falling; New York Community Bank rose 0.33%. On the news side, after the bankruptcy crisis last year, it seems that the pain of banks in the US region has not yet ended. The latest situation shows that operational pressure may mean that financial institutions need to sell assets to maintain balance sheet stability, while Federal Reserve policy may increase the pressure on asset price fluctuations. SPDR's S&P regional bank ETF has fallen by about 13% this year, far behind the performance of large banks. The Federal Reserve stated in its semi annual financial stability report released last week that banks with higher exposure to commercial real estate and consumer loans may suffer greater losses.
Chinese concept stocks rose
Popular Chinese concept stocks rose against the trend, with the Nasdaq China Golden Dragon Index rising 0.75%, recording a four-day consecutive rise. Good Future rose by over 8%, Gaotu rose by over 6%, Yixian E-commerce and Century Internet rose by over 5%, New Oriental and Tuniu rose by over 3%, Wuxin Technology and 36Kr rose by over 2%, Tencent Music and JD.com rose by over 1%, Baidu, Alibaba, and NetEase rose slightly. Bilibili, Ideal Automobile, Futu Holdings, Pinduoduo, Weibo fell more than 1%, while NIO and Vipshop saw a slight decline.
Good Future rose 8.89%. The company released its fourth quarter financial report as of February 29, 2024, which showed a net revenue of 429.6 million US dollars, a year-on-year increase of 60%, higher than market expectations of 386.1 million US dollars; After adjustment, the earnings per ADS were 0.08 US dollars, and the loss per share for the same period last year was 0.02 US dollars, which is also higher than the market expectation of 0.02 US dollars.
Baidu rose 0.72%, with Bank of China International reiterating Baidu's "buy" rating in a report. The bank pointed out that Baidu announced that ERNIE Bot has covered 200 million users, and the API has reached 200 million daily usage. At the same time, the company launched a series of toolkits for developers. The bank sees a strategic adjustment of the company towards PaaS services and will encourage partner enterprises to better develop their artificial intelligence applications/models on Baidu Cloud, leveraging the company's large language models and computing power to achieve more efficient operations.