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. 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. 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. GOOGL and Amazon.com, Inc. AMZN both witnessed similar declines, while Apple Inc. AAPL managed to avoid losses.
NVIDIA Corporation NVDA and Tesla, Inc. TSLA saw some gains, outperforming the basket.
The Roundhill Magnificent Seven ETF MAGS fell 3%.
| Name | Market Cap | Market Cap Loss/Gain (1-day) | 1-Day % Change |
|---|---|---|---|
| Microsoft Corporation | $2,905.08B | -$128.47B | -4.37% |
| Apple Inc. | $2,602.88B | -$7.08B | -0.27% |
| NVIDIA Corporation | $2,018.70B | +$59.39B | +2.94% |
| Alphabet Inc. | $1,933.75B | -$54.09B | -2.76% |
| Amazon.com, Inc. | $1,783.97B | -$51.15B | -2.81% |
| Meta Platforms, Inc. | $1,101.35B | -$132.35B | -13.17% |
| Tesla, Inc. | $528.24B | +$11.44B | +1.60% |
| Total | $12,873.97B | -$302.91B | N/A |
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 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 SPY and the tech-heavy Nasdaq 100 index, as tracked by the Invesco QQQ Trust 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 XLC plunging 4.4%, marking its worst session since October 2022.
Read now: Tesla Posts Strongest Session Since January 2022: Is A Trend Reversal Underway?
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