The Dow drops 375 points on low economic growth, high inflation, and weak tech earnings

Microsoft and Google parent Alphabet were set to release their earnings after the bell

By Vinamrata Chaturvedi5 min readUpdated April 25, 2024

The Dow Jones Industrial Average and other major U.S. stock indexes recovered from earlier steep losses at the end of the day Thursday, but they remained deep in the red. Quarterly earnings reports from tech giants such as Facebook $META parent Meta and IBM $IBM disappointed investors. All eyes turned to Microsoft $MSFT and Google $GOOGL parent Alphabet, which were set to release their earnings reports after the closing bell. Microsoft and Alphabet stock were down 2.4% and 1.9%, respectively, by closing time.

New data showed that economic growth slowed sharply last quarter. The Commerce Department’s GDP report showed that growth was much weaker than expected. The U.S. gross domestic product grew at a seasonally adjusted annual rate of 1.6% in the first quarter of this year. That’s a decrease from the strong growth of 4.1% in the second half of last year.

And inflation isn’t going anywhere anytime soon, as the Bureau of Economic Analysis revealed on Thursday that the “core” Personal Consumption Expenditures (PCE) index, which excludes volatile food and energy categories, increased by 3.7% year-over-year in the first quarter. This was higher than the estimated growth of 3.4% and significantly higher than the 2% gain seen in the previous quarter. It means that the Federal Reserve may not cut interest rates as quickly as previously expected.

The Dow, which fell more than 600 points earlier in the day, was still down 375 points, or 0.98%, to 38,085 by the end of the day. The S&P 500 shed 0.4% and the Nasdaq $NDAQ dropped 0.6%.

Meta stock sinks on big Metaverse losses

Meta stock plummeted more than 10% by closing time, even as the Facebook parent company reported better-than-anticipated sales in its quarterly earnings the day before. The losses appeared to be driven by the company’s steep Metaverse losses, and CEO Mark Zuckerberg’s commitment to continue that spending.

Meta reported revenues of $36.5 billion for the three months ended March 31, almost 30% higher than the same period last year and ahead of the expectations of Wall Street analysts surveyed by FactSet. And its profits more than doubled to $12 billion. Earnings per share were $4.71, more than the $4.32 expected.

Investors didn’t seem to care about those good fortunes, though. They cared, instead, about its lukewarm second-quarter outlook. The company issued light revenue guidance and is expecting revenues for the three months ending June 31 at $36.5 to $39 billion.

IBM stock drops over 8%

IBM released its first-quarter results on Wednesday after the market closed. The company surpassed earnings expectations but fell short on revenue. A $1.68 adjusted earnings per share was reported, versus an expected $1.60, while a $14.46 billion revenue was reported, compared to a $14.55 billion estimate. The company is acquiring cloud software company HashiCorp for $6.4 billion in cash, paying $35 per share. IBM stock was down almost 8% by the end of the day.

Southwest Airlines has Boeing headaches

Southwest Airlines on Thursday said it would limit hiring and pull out of some airports after it posted a loss for the first quarter of 2024.

The Dallas-based operator lost $231 million from January through March, more than the $159 million loss it recorded during the same period in 2023. The airline lost 36 cents per share, slightly below the loss of 34 cents per share that Wall Street had expected. Revenue rose to $6.33 billion, but below analysts’ expectations of $6.42 billion.

Southwest is also taking a hit from delays at Boeing $BA, which has slowed down production of new airplanes while it focuses on quality control issues. Just 20 Boeing 737 Max 8 jets are expected to be delivered to Southwest in 2024, even as the operator retires 35 other aircraft. Southwest had planned to receive 46 new planes this year and retire 49 aircraft.

Southwest Airlines stock was down 6.9% by closing time

Microsoft-backed Rubrik soars 20% on its IPO day

Rubrik, a Microsoft-backed company that makes data management software, went public on Thursday and the stock quickly soared 20%. Under the ticker symbol RBRK, the unicorn company priced its initial public offering at $32 per share. The stock opened at $38.60 per share. The 10-year-old company raised $752 million by selling 23.5 million shares ahead of its debut on the New York Stock Exchange, valuing the company at $5.6 billion. By the end of the day, the stock was over 15.5% at $37.

Chipotle tells employees not to eat chicken on the job

Chipotle $CMG is hogging its chicken from employees in a bid to keep up with surging demand from customers.

“Due to the high demand for chicken in our restaurants and sustained success of our Chicken Al Pastor, last week we asked all our corporate and in-restaurant employees to temporarily select another protein option for their meals to preserve our supply,” Laurie Schalow, Chipotle’s chief corporate affairs and food safety officer, said in a statement.

That came just a day after the restaurant chain reported earnings that revealed its sales were being driven by its Braised Beef Barbacoa and Al Pastor Chicken menu items.

Chipotle stock shot up more than 6% by the end of the day, reaching a new 52-week high.

Comcast stock falls despite an earnings beat

Comcast $CMCSA stock fell nearly 6% by closing time, as the media conglomerate lost more customers than expected from its streaming unit in the first quarter. Earnings per share were $1.04 adjusted, while analysts expected 99 cents. For the quarter, the company’s revenue was $30.06 billion, compared with an expected $29.81 billion.

Bitcoin falls below $64,000

Bitcoin fell below $64,000 on Thursday morning but recovered a bit by late afternoon, as tech stocks continued to decline. The price decline came a week after the Bitcoin “halving” event, which cut the reward for miners who create new Bitcoin from 6.25 Bitcoin to 3.125. The top cryptocurrency was celebrating the post-halving phase earlier this week.

–Laura Bratton, Francisco Velasquez, and William Gavin contributed to this article.

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