US Open: BigTech under pressure amid 12% Meta Platforms selloff

• Wall Street opens the session in a weak mood. US100 loses almost 1%
• Dow Jones (US30) and Russell 2000 (US2000) record the biggest declines, losing 1.3% and 1.7%, respectively
• Meta Platforms shares record a 13% drop, pointing to one of the all-time record one-day declines in capitalization
• Stagflationary data from the U.S. did not please Wall Street showing weaker-than-forecast GDP and higher prices
• Caterpillar (CAT.US) a leading maker of equipment for the industrial and construction sector warned of a possible decline in sales momentum
• Investors uncertain about Alphabet (GOOGL.US) and Microsoft (MSFT.US) results are taking profits ahead of BigTech results

Thursday's U.S. session is marked by broader uncertainty, after Meta Platforms' better-than-expected results failed to improve sentiment around the company's valuation, resulting in a nearly 15% sell-off. We are also seeing declines in the shares of Alphabet and Microsoft, which will report financial results today after the US session. Investors didn't like today's somewhat stagflation data, which showed a decline in consumption amid elevated inflation and lower-than-expected U.S. economic growth. President Biden commented on the data, suggesting that a recovery is needed at this level, and traders are moving expectations for the first Fed rate cut from November to December 2024 (the first fully priced cut).

Data from the US

Q1 GDP: 1.6% k/k (expected: 2.4%; previous: 3.4%)

• Government spending adds just 0.21 pp, with previous increase of 0.79 pp
• Private investment adds 0.56 pp, with previous impact of 0.15 pp
• Private consumption 1.68 pp, with the previous level of 2.2 pp
• Private consumption: 2.5% (expected: 3.0%; previous: 3.3%)

GDP deflator: 3.1% (expected: 3.0%; previous: 1.7%)

PCE Core: 3.7% (expected: 3.4%; previous: 2.0%)

Jobless claims: 207,000 (expected: 215,000; previous: 212,000). 

Meta, Microsoft, Alphabet, Amazon and IBM are one of the weakest S&P 500 components today. Source: xStation5

US100 chart (M30 interval)

The US100 index remains above 17,000 points.but downward reactions around the 61.8 and 71.6 Fibonacci abolition of the March 2023 downtrend wave suggest that bears may seek to test the important psychological zone.

Source: xStation5

News from companies

• Southwest Airlines (SWN.US) has lowered for the third time its estimates for new aircraft deliveries from Boeing in 2024. The company intends to take cost-cutting measures to mitigate the resulting impact on earnings. The company's shares are down nearly 8%.
• Caterpillar (CAT.US) said it expects sales to decline in the current quarter as demand for construction equipment weakens after last year's boom. Shares lose 7%
• Comcast (COM.US) beat quarterly revenue estimates thanks to higher-than-expected growth in subscribers to its Peacock streaming service and strong popularity in theme parks.
• Merck (MRK.US) raised its annual profit and revenue forecast on strong sales of its cancer drug Keytruda.
• Meta's (META.US) shares are down, and while the results were great, plans for growing, long-term spending on artificial intelligence have made investors uncertain of the results; the company has provided fairly conservative forecasts for 2024. As a result, the company's shares are trading down 13%.

Strong results from Align and American Airlines

• Align Technology raised its annual growth forecast on Wednesday and exceeded Wall Street's profit expectations for Q1, based on steady demand for clear trays among younger patients. The braces maker now expects total revenue growth of 6% to 8% year-on-year in 2024, up from the previously expected mid-single-digit growth in 2023. The company's total revenue in Q1 rose 5.8% to $997.4 million, beating forecasts of $974.41 million. Nearly 84% came from sales of flagship products. On an adjusted basis, the company earned $2.14 per share, above analysts' average estimates of $1.97. Weaker sentiment, however, lifts the company's shares by more than 3%
• American Airlines Group gains 2%, after the company reported Q1 profit well above analysts' expectations, on the back of a rebound in business travel and expectations of strong demand during summer. The company expects adjusted earnings of $1.15 per share to $1.45 per share for the quarter ending June 30. The airline company reported a loss of $312 million, or $0.48 per share, in the first quarter of 2024, compared with a profit of $10 million, or $0.02 per share, last year. The airline's total operating revenues rose 3.1% to more than $12.5 billion.