Major U.S. stock indexes fell Thursday, weighed down by a one-two punch of economic data that showed growth slowing and inflation persisting.
The Dow Jones Industrial Average fell more than 370 points, or about 1 percent. The S&P 500 and tech-heavy Nasdaq both closed lower by about half-a-percent.
Markets sold off all day after the morning's first-quarter GDP report came in well short of expectations, showing the U.S. economy grew by a paltry 1.6 percent. Economists predicted growth of about 2.4 percent.
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The same report included the Fed's preferred inflation gauge—personal consumption expenditures (PCE) excluding volatile food and energy prices—rising by 3.7% on an annualized rate. PCE rose by 2 percent the previous quarter.
The combination of those two headline numbers—slowing growth and sticky inflation—sent the wider market lower on concerns that it will take longer than hoped for the Federal Reserve to start cutting interest rates. At the same time, a slowdown in growth could actually kickstart a rate-cut cycle, provided inflation gets closer to the Fed's 2 percent target.
Adding to the downward pressure, shares of Meta fell 10 percent, sparking a sell-off in other big tech stocks after the Facebook parent reported quarterly earnings Wednesday that spooked investors. Despite ad revenue growing by 27 percent, the company issued soft guidance for the current quarter as it plans to "invest significantly more" in AI, CEO Mark Zuckerberg said on the earnings call.
"We expect capital expenditures will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts," Meta said in an accompanying statement.
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Zuckerberg acknowledged that plowing cash into new AI projects will be expensive and won't immediately pay off on the bottom line, but reassured investors that "we have a strong track record of monetizing" similar investments once they reach scale.
Microsoft and Google parent Alphabet, both of which fell about 2 percent on Thursday, were scheduled to report their results after the bell. Like Meta, both of those firms are spending significantly on AI, though the perception among investors is that Microsoft has surged ahead of Google in the artificial intelligence race.
On Friday, oil giants ExxonMobil and Chevron will close out a busy earnings week as Wall Street looks to reinvigorate a market rally that kicked off a bullish year, but has since lost some steam.
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