Stocks ended a three-day streak of gains on Thursday as disappointing forecasts from Meta, owner of Facebook and Instagram, battered the technology sector, and the Japanese yen crossed the 155 mark. for a dollar for the first time since 1990.
Tepid US GDP data sent Wall Street lower at the open, and Meta’s collapse also weighed on sentiment. More results from big tech companies are expected later today.
U.S. Treasury yields rose after data showed signs of persistent inflation, dampening hopes that the Federal Reserve will cut interest rates anytime soon.
Gold pared its gains.
MSCI’s gauge of stocks across the world fell 4.54 points, or 0.60%, to 754.92 at 2:34 p.m. ET (1834 GMT).
The Dow Jones Industrial Average lost 451.63 points, or 1.17%, to 38,009.29, the S&P 500 lost 33.99 points, or 0.67%, to 5,037.64, and the Nasdaq Composite lost 140.87 points, or 0.90%, to 15,571.44.
In a results-packed week, the big names in tech are in the spotlight, with Google parent Alphabet, Microsoft and Intel due to report results after Thursday’s trading close.
“If Meta is any guide, it seems the market just doesn’t tolerate inline results – if you had a good run in Q1 and Q2, you either blow the lights out or the market takes its share of meat ” said Chris Weston, head of research at Pepperstone.
Robert Alster, chief investment officer at Close Brothers Asset Management, also noted Meta CEO Mark Zuckerberg’s comments about the need to spend to stay in the AI arms race.
European stocks closed 0.7% lower, limiting losses after losing more than 1% during the day, hit by poor results from consumer giant Nestlé and Dutch digital payments company Adyen.
London’s FTSE 100 held on to its gains, rising 0.26% to a record high, as British miner Anglo American pounced on a $39 billion takeover offer from Australian rival BHP.
AMERICAN SLOWDOWN
Beyond company results, investors digested the more marked slowdown than expected in American economic growth in the first quarter.
“Despite the expected slowdown in GDP in 2024, there are no imminent signs of recession,” said Stephen Rich, president and CEO of Mutual of America Capital Management.
Higher-than-expected inflation reports have pushed back and reduced expectations for an interest rate cut from the Federal Reserve, with markets now pricing the chance of a first cut in September at around 70%. Investors aren’t even fully convinced there will be another decline this year, after expecting around six declines at the start of the year.
Shifting expectations for U.S. rates have pushed Treasury yields and the dollar higher, casting a shadow over the foreign exchange market. Against a basket of currencies, the dollar rose slightly to 105.89 after the GDP data.
The yield on benchmark U.S. 10-year bonds rose 5.2 basis points to 4.706%, from 4.654% last Wednesday.
The two-year bond yield, which typically moves based on interest rate forecasts, rose 6.1 basis points to 4.9975%, from 4.937% late Wednesday.
The Japanese yen weakened 0.12% against the greenback, to 155.53 per dollar, and hit its lowest level in 34 years. It has now crossed the last line of demarcation that operators had drawn for Japan to intervene in the markets.
“Tokyo has still not intervened, and I repeat that it appears there will be no intervention as long as the rise in USD/JPY continues in a relatively non-volatile manner,” said Alvin Tan , head of Asian foreign exchange strategy at RBC Capital Markets.
The Bank of Japan began its two-day rate-setting meeting on Thursday, and is expected to keep its short-term interest rate target unchanged.
Focus will be on what Bank of Japan Governor Kazuo Ueda will say about the yen’s woes.
US crude oil rose 0.92% to $83.57 per barrel and Brent settled at $89.01 per barrel, up 1.12% on the day.
Spot gold rose 0.68% to $2,331.49 an ounce. U.S. gold futures fell 0.2% to $2,319.90 an ounce.
