Markets plummet as US GDP growth slows significantly in Q1

Dow tumbled 647, decliners over advancers 5-1 & NAZ gave back 265.  The MLP index lost 1+ to the 282s & the REIT index fell 3 to the 356s.  Junk bond funds were sold along with stocks & Treasuries retreated, bringing higher yields.  Oil declined almost 1 to the low 82s & gold rebounded 9 to 2047 after recent selling.

AMJ (Alerian MLP Index tracking fund)

The US economy grew at a slower pace than expected at the beginning of 2024 as consumers pulled back on spending in the face of higher inflation.  Gross domestic product (GDP), the broadest measure of goods & services produced across the economy, grew by 1.6% on an annualized basis in the 3-month period Jan-Mar, the Commerce Dept said in its first reading of the data.  That is much lower than the 2.4% increase forecast & marks a sharp slowdown from the 3.4% pace seen during the 4th qtr & is the slowest pace of growth in 2 years.  Consumer spending, which accounts for about 2/3 of GDP, moderated during the first qtr.  It rose 2.5% for the period, down from the 3.3% figure recorded the previous qtr amid signs the Federal Reserve's fight against inflation has stalled.  The report showed that an inflation gauge closely watched by the Fed rose 3.4% during the first qtr, the largest gain in a year.  Excluding food & energy, prices jumped 3.7%.  Both figures point to inflation that is still running well above the Federal Reserve's 2% target even as the economy starts to slow in the face of higher interest rates.  The economy has remained solid even as experts predicted that the Federal Reserve's aggressive interest rate hike campaign would send it spiraling into a recession.  For all of 2023, the economy expanded 3.1%, up less than 1% in the previous year.  However, there are signs that growth is finally beginning to slow in the face of tighter monetary policy.  Job growth is moderating.  The housing market, which is vulnerable to higher interest rates, is trapped in a prolonged downturn & consumer spending has shown signs of cooling off.  Many economists expect to see further cooling in coming months as higher interest rates continue to work their way thru the economy.

US economic growth falls short of expectations at start of 2024 amid inflation pickup

Meta (META) shares tumbled 13% after the company issued weak revenue guidance that overshadowed its first-qtr earnings beat.  The company reported EPS of $4.71 on $36.46B in revenue for the qtr, exceeding the $4.32 expected EPS & $36.1B in expected sales.  The stock sell-off gained pace after CEO Mark Zuckerberg discussed spending in areas such as artificial intelligence & mixed reality that are not currently profitable.  META expects 2nd-qtr revenue of $36.5-39.0B.  The midpoint of the range, $37.75B, falls short of analysts' estimate of $38.3B.  The stock sank 64 to 429.

Meta tumbles 11% on weak revenue forecast and Zuckerberg’s comments on spending

Merck (MRK), a Dow stock, first-qtr revenue & adjusted earnings topped expectations as it posted strong sales of its blockbuster cancer drug Keytruda & vaccine products.  The pharmaceutical giant also raised & narrowed its full-year revenue & adjusted earnings forecasts.  MRK expects 2024 sales to come in at $63.1-$64.3B, up from previous guidance of $62.7-64.2B.  The company expects full-year adjusted EPS of $8.53 - $8.65, up from its prior forecast of $8.44 - $8.59.  That outlook includes a 1-time charge of roughly 26¢ per share related to its acquisition of Harpoon Therapeutics in Jan.  The company develops immune-based cancer drugs.  The guidance also includes a negative impact of 30¢ per share from foreign exchange changes.  The company posted EPS of $1.87 for the first qtr.  That compares with EPS of $1.11 during the year-earlier period.  Excluding acquisition & restructuring costs, EPS was $2.07.  Both adjusted & nonadjusted profit for the period include the charge related to the Harpoon deal.  MRK raked in $15.8B in revenue for the quarter, up 9% from the same period a year ago.  Those results come as MRK shows substantial progress in preparing for Keytruda's patent expiration in 2028.  The loss of exclusive rights to the drug will likely cause sales to fall, forcing the company to draw revenue from elsewhere.  The stock rose 2.07 in a down market.

Merck beats earnings expectations, raises outlook on strong Keytruda and vaccine sales

The GDP news was very disappointing to investors.  Slower economic growth may help make the case for interest rate cuts coming a little sooner than expected.  But that is difficult to see after negative data from this report.  Dow has sunk 2000 in Apr.

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