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

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.

Nasdaq 100 (^NDX) futures fell 1.6% on the heels of a go-nowhere day for the major Wall Street gauges. Futures on the S&P 500 (^GSPC) lost 1.2%, while those on the Dow Jones Industrial Average (^DJI) slipped 1.1%.

Meta shares sank more than 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.

That 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 (MSFT) and Alphabet (GOOGL, GOOG), also burdened with high earnings growth and AI expectations, when they report after the bell Thursday.

Meanwhile, 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 4.72%, its high for the year.

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.

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    JP Morgan makes a key point on Meta

    Meta (META) is getting blasted pre-market 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.

    JP Morgan 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.

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    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 Live around 9:45am ET.

    There is Chipotle...and then there is everyone else.

    There is Chipotle…and then there is everyone else. (Bernstein)

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    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 if this commentary suggests an economic slowdown in coming months — trucking and rail companies are often seen as economic bellwethers.

    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.”

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    IBM shares tank — here’s why and what the CFO told Yahoo Finance

    Big Red.

    Shares of IBM (IBM) — aka Big Blue — are getting slammed pre-market 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.”

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