The GDP growth rate of the United States in the first quarter fell short of expectations, and the Dow fell by more than 370 points

* The three major indexes closed lower, with the Dow down more than 370 points

* U.S. GDP grew at an annualized rate of 1.6% quarter-on-quarter in the first quarter, significantly missing market consensus expectations

* Google's U.S. stock rose more than 15% after hours, increasing its market value by $300 billion

On April 25 (Thursday), local time, U.S. stocks rebounded after opening low, and the three major indexes closed down significantly. Data released by the U.S. Department of Commerce during the day showed that the U.S. economy grew less than expected and inflationary pressures intensified in the last quarter, raising concerns that the economy would fall into a stagflation phase, and Meta's weak revenue guidance in the after-hours session of the previous trading day hit market sentiment. At the close, the Dow fell 375.26 points, or 0.98%, the NASDAQ fell 0.64%, and the S&P 500 fell 0.46%.

In terms of industry sectors, the 11 major sectors of the S&P 500 index fell six times and rose five times. Communication services and healthcare led the declines with declines of 4.03% and 0.62%, respectively, while materials and energy led gains of 0.69% and 0.50%, respectively.

International Business Machines Corp. (IBM) and construction machinery giant Caterpillar led the Dow component declines. The former fell 8.25%, with first-quarter revenue up 1% year-on-year to $14.462 billion, failing to meet some investors' expectations, while the latter fell 7.02% due to a slight decline in quarterly sales.

Chinese concept stocks bucked the trend, with the Nasdaq China Golden Dragon Index closing up 0.75%, the fourth consecutive session of gains. Among the popular stocks, New Oriental rose 3.5%.

After hours, Google's parent company Alphabet and Microsoft released their financial reports for the first quarter of 2024, and key indicators such as quarterly revenue and net profit of both companies exceeded expectations. As of press time, Alphabet shares were up 15% in after-hours trading, and Microsoft was up 5% in after-hours trading.

According to the financial report, Alphabet's revenue in the first fiscal quarter was $80.54 billion, compared with analysts' expectations of $79.04 billion, Google Cloud's revenue in the first fiscal quarter was $9.57 billion, analysts expected $9.37 billion, operating profit in the first fiscal quarter was $25.47 billion, analysts expected $22.4 billion, and Google advertising revenue in the first fiscal quarter was $61.66 billion, compared with analysts' expectations of $60.18 billion. The board also approved a share repurchase program of up to $70 billion.

"Our first-quarter results reflect strong performance across search, YouTube and cloud services. "Our leadership in AI research and infrastructure, as well as our global product footprint, positions us ready for the next wave of AI innovation," Sundar Pichai, the company's CEO, said in a statement. ”

In the same period, Microsoft's total revenue was $61.86 billion, an increase of 17% from the same period last year, higher than the market expectation of $60.87 billion. Adjusted earnings per share (EPS) came in at $2.94, beating the consensus of $2.82. In terms of business, the intelligent cloud division generated revenue of $26.71 billion in the first quarter, an increase of about 21%, exceeding analysts' forecasts of $26.26 billion. Azure-based cloud services revenue accelerated by 31%, while the increase in AI contribution increased to 7 percentage points, up from 6 percentage points in the previous quarter.

In terms of economic data, the first estimate data released by the U.S. Department of Commerce on the 25th showed that the U.S. real gross domestic product (GDP) grew at an annualized rate of 1.6% in the first quarter, which was lower than the consensus market expectation, and also significantly slower than the growth rate of 4.9% and 3.4% in the third and fourth quarters of last year, and the lowest level since the second quarter of 2022.

Specifically, in the first quarter, personal consumption expenditures, which account for about 70% of the total U.S. economy, grew by 2.5%, 0.8 percentage points narrower than the growth rate in the fourth quarter of last year. Among them, spending on goods fell by 0.4%. At the same time, non-residential fixed asset investment, which reflects the investment status of enterprises, increased by 2.9%, a significant slowdown from the 3.7% growth in the fourth quarter of last year. In the quarter, private inventory investment dragged economic growth down 0.35 percentage points, and net exports of goods and services also dragged economic growth down 0.86 percentage points.

The concurrently released personal consumption expenditures (PCE) price index rose 3.4% in the first quarter, far exceeding the 1.8% in the fourth quarter of 2023. The Fed's most important inflation gauge, the core PCE price index, which excludes food and energy prices, rose by 3.7%, higher than the forecast of 3.40% and almost double the previous reading of 2%.

In addition, the number of initial jobless claims in the United States last week was 207,000, further moving closer to the lower end of the range of 194,000 to 225,000 this year, highlighting the resilience of the labor market.

U.S. Treasury yields rose across the board, with the 2-year yield briefly breaking through the 5% mark and rising as high as 5.027%.

Analysts said that on the one hand, weak economic data may prompt the Fed to send some dovish signals, but on the other hand, given that economic growth is still at a solid level and inflation is showing a re-acceleration trend, the chances of the Fed starting to cut interest rates before September are increasingly slim. Traders pushed back expectations for the Fed's first rate cut to December, according to the CME FedWatch tool, expecting only one rate cut throughout the year.

In terms of individual stocks, Meta shares closed down 10.56%, the biggest one-day decline since October 2022, as the company released a second-quarter revenue outlook that missed market expectations while raising its capital expenditure forecast for this year. CEO Mark Zuckerberg said on the earnings call that "investment in AI will take a long time to pay off," raising concerns about the commercial future of AI technology.

JPMorgan Chase & Co. reiterated its overweight rating on Meta and lowered its price target to $480 from $535. While Meta expects to face challenges in the coming months, including from the Monetization of Reels, the company is optimistic about its AI plans, which it believes will deliver significant long-term gains, according to the bank's analyst Amers. "Our success with Meta in Llama 3 and Meta AI increases management's confidence in leading the way in AI. Amers wrote in a report.

Amers believes that Meta's competitive position, focus on user experience, and strategic alignment with AI and the metaverse bode well for Meta.

Merck rose 2.93% as the company raised its annual profit and revenue forecasts on the back of strong sales of cancer treatment Keytruda and human papillomavirus vaccine Gardasil.

American Airlines rose 1.51% as it expects profit to beat expectations for the quarter, with strong demand for business travel as well as summer travel.

According to data from the London Stock Exchange Group (LSEG) as of Thursday morning, overall earnings of S&P 500 companies are expected to increase by 4.3% year-on-year in the first quarter of 2024. This figure is up from 3.3% the previous day.

The latest estimates are based on forecasts for the earnings of 190 companies in the S&P 500 that have reported earnings, and about 78% of them beat analysts' expectations.

In terms of commodities, oil prices staged a "V-shaped" trend on the 25th, with West Texas Intermediate (WTI) crude oil futures for June delivery on the New York Mercantile Exchange rising 76 cents, or 0.92%, to close at $83.57 per barrel. The futures price fell as much as 36 cents, or 0.43%, to $82.45 a barrel after the release of U.S. GDP data.

(This article is from Yicai)