[New York Stock Market] Mixed Close Ahead of GDP and Inflation Data... Meta Down 12% in After-Hours

Tesla Soars 12% on Expansion of Low-Cost Electric Vehicles
Q1 GDP and March PCE Inflation in Focus

The three major indices of the U.S. New York stock market closed mixed on the 24th (local time) in a narrow range. After rising for two consecutive days on expectations for corporate earnings following the start of the earnings season this week, the market is showing a cautious trend ahead of the preliminary release of the first-quarter Gross Domestic Product (GDP) growth rate and the March Personal Consumption Expenditures (PCE) price index. The U.S. Treasury auctioned $70 billion in government bonds, causing bond yields to rise.

On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average fell 42.77 points (0.11%) from the previous trading day to close at 38,460.92. The large-cap-focused S&P 500 index rose 1.08 points (0.02%) to 5,071.63, and the tech-heavy Nasdaq index gained 16.11 points (0.1%) to close at 15,712.75.

By individual stocks, Meta, the parent company of Facebook, fell 0.52% during regular trading but dropped more than 12% as of 4:46 p.m. after hours despite reporting earnings that exceeded expectations. Weak earnings guidance dragged the stock down. Meta reported first-quarter revenue of $36.46 billion and earnings per share (EPS) of $4.71, surpassing analyst estimates. Earlier, LSEG had forecasted Meta’s revenue at $36.16 billion and EPS at $4.32.

Tesla surged 12.06% after announcing plans to expand low-priced electric vehicle launches the previous day. Although its first-quarter earnings fell short of market expectations, the plan to release affordable new models acted as a positive catalyst for the stock. Bank of America (BofA) upgraded Tesla’s investment rating from 'neutral' to 'buy' following its first-quarter earnings announcement. BofA maintained a 12-month target price of $220, suggesting about a 50% upside from the previous day’s closing price of $144.68. BofA analyzed that Tesla’s faster-than-expected launch of low-priced new vehicles, the upcoming robo-taxi unveiling in August, and recent cost reductions from layoffs would serve as positive catalysts for the stock. In an investor memo, BofA stated, "The first-quarter earnings and management commentary addressed investors’ main concerns and revitalized growth expectations."

Additionally, Visa and U.S. semiconductor company Texas Instruments (TI) rose 0.33% and 5.64%, respectively, after reporting quarterly earnings that exceeded expectations.

The market is focusing on the U.S. first-quarter GDP report to be released on the 25th. The first-quarter GDP is expected to grow 2.5% compared to the previous quarter. Although this is a slowdown from the 3.4% growth in the fourth quarter of last year, it still exceeds the long-term trend. On the following day, the March core PCE price index will be released. This figure is expected to rise 2.6% year-over-year, a smaller increase compared to 2.8% in February. With the Consumer Price Index (CPI) exceeding market expectations for three consecutive months this year, the PCE price index, which the Federal Reserve (Fed) closely monitors, is expected to provide hints about the future path of interest rates.

Jose Torres, senior economist at Interactive Brokers, said, "Ahead of the GDP report release the next day, market participants are hoping for weak figures that could lead to an interest rate cut soon. However, we expect stronger-than-anticipated numbers. This would be bad news regarding the timing of rate cuts."

Market attention is also focused on corporate earnings announcements. According to market research firm FactSet, more than one-fifth of the companies in the S&P 500 index have reported earnings so far, and over three-quarters of them have exceeded analyst expectations. Solita Marcelli, Chief Investment Officer (CIO) at UBS Global Asset Management, said, "A strong earnings season is likely to help restore market confidence. We expect the S&P 500’s earnings per share (EPS) to increase by 7-9% this quarter and total earnings for 2024 to grow by 9%."

As the U.S. Treasury issued $70 billion in government bonds on the day, bond yields rose. The 10-year U.S. Treasury yield, a global benchmark for bond yields, increased by 4 basis points (bp) from the previous trading day to 4.64%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, rose 2 bp to 4.92%.

International oil prices fell as concerns over Middle East instability eased and U.S. manufacturing activity cooled. West Texas Intermediate (WTI) crude oil closed at $82.81 per barrel, down $0.55 (0.66%) from the previous day, and Brent crude, the global benchmark, fell $0.40 (0.45%) to $88.02 per barrel.