In a tumultuous day for tech stocks, the collective market value of the Magnificent 7 tech giants plummeted by over $300 billion in the first trading hour on Thursday, primarily fueled by a weaker-than-expected revenue outlook from Meta Platforms Inc. (NASDAQ: META) and concerning economic indicators arising from the first-quarter gross domestic product release.
What Happened: Meta Platforms outperformed Wall Street's expectations with first-quarter revenue of $36.45 billion, a 27% increase year-over-year, and earnings per share of $4.71, beating the predicted $4.32. Investors pulled back after the social media giant issued subdued guidance for the upcoming quarter.
The company's forecast for the second quarter anticipates revenue between $36.5 billion and $39 billion, putting the lower end of the range below the consensus estimate of $38.3 billion.
Additionally, the social media giant anticipates increases in infrastructure and legal costs - pushing full-year expenses to between $96 billion and $99 billion.
Compounding the tech sector's woes were the latest GDP figures released Thursday by the Bureau of Labor Statistics.
The U.S. economy expanded at a significantly reduced pace of 1.6% on an annualized basis in the first quarter of 2024, a sharp deceleration from the previous quarter's 3.4% growth rate and well below the forecasted 2.5%.
Inflation concerns were reignited with the Personal Consumption Expenditure (PCE) price indices for the first quarter showing an increase.
The headline PCE price index accelerated from 1.8% in the previous quarter to 3.4% , while the core PCE price index, which excludes food and energy prices and is a key inflation measure for the Federal Reserve, climbed from 2% to 3.7%, surpassing expectations of 3.4%.
Mag7 Stocks, Bond Market React
The Magnificent Seven had cumulatively wiped out $303 billion of market value by 11 a.m. in New York.
Meta suffered the heaviest losses, down 13%, shedding $143 billion alone. Microsoft Corp. (NASDAQ: MSFT) also sharply contributed to the tech market rout, wiping out $126 billion, down 4.3% ahead of the company's earnings report after the market close.
Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) and Amazon.com, Inc. (NASDAQ: AMZN) both witnessed similar declines, while Apple Inc. (NASDAQ: AAPL) managed to avoid losses.
NVIDIA Corporation (NASDAQ: NVDA) and Tesla, Inc. (NASDAQ: TSLA) saw some gains, outperforming the basket.
The Roundhill Magnificent Seven ETF (NASDAQ: MAGS) fell 3%.
Treasury yields, particularly the two-year note, surged past 5%, reflecting heightened investor anxiety over inflation and its potential implications for future Federal Reserve actions.
This resulted in a broad sell-off in bonds, with significant losses noted in long-term treasury ETFs such as the iShares 20+ Year Treasury Bond ETF (NYSE: TLT), which declined 0.8%.
The broader stock market also felt the pinch, with major indices recording significant losses.
The SPDR S&P 500 ETF Trust (NYSE: SPY) and the tech-heavy Nasdaq 100 index, as tracked by the Invesco QQQ Trust (NASDAQ: QQQ), fell by 1.4% and 1.7%, respectively.
Notably, the communication services sector was among the hardest hit, with the Communication Services Select Sector SPDR Fund (NYSE: XLC) plunging 4.4%, marking its worst session since October 2022.