Investing.com -- U.S. stock futures retreat on Thursday, with markets focusing on results from Facebook-owner Meta Platforms (NASDAQ:META) and upcoming numbers from other mega-cap technology groups. IBM unveils mixed first-quarter earnings and announces that it will acquire cloud software firm HashiCorp (NASDAQ:HCP) in a $6.4 billion deal. Elsewhere, the U.S. economy is expected to have slowed in the opening three months of 2024, but remain resilient in the face of high interest rates and persistent inflationary pressures.
1. Futures inch lower
Stock futures in New York pointed lower on Thursday, as investors assessed earnings from big-name technology companies and looked ahead to a fresh U.S. economic growth reading.
By 03:30 ET (07:30 GMT), the Dow futures contract had shed 95 points or 0.2%, S&P 500 futures had dipped by 34 points or 0.7%, and Nasdaq 100 futures had slipped by 211 points or 1.2%.
The main indices on Wall Street registered a mixed close in the prior session following choppy trading, with the benchmark S&P 500 gaining 0.02% and the tech-heavy Nasdaq Composite rising by 0.1%. The 30-stock Dow Jones Industrial Average retreated by 0.1%.
Along with results after the closing bell on Wednesday from Meta Platforms (see below), traders will likely be keen to pour through quarterly figures from software giant Microsoft (NASDAQ:MSFT) and Google-parent Alphabet (NASDAQ:GOOGL) later today. First-quarter U.S. gross domestic product data, which could provide some insight into the health of the world's largest economy and potentially factor into how the Federal Reserve approaches future monetary policy decisions, will also be in focus on Thursday.
2. Meta shares fall as CEO Mark Zuckerberg outlines AI spending plans
Shares in Meta Platforms dropped by more than 15% in extended hours U.S. trading, erasing billions of dollars from its market value, despite the social media group posting better-than-estimated revenue in the first three months of 2024.
Meta, whose family of apps also includes Instagram and WhatsApp, elevated its projected annual capital expenditures forecast to $40 billion from $37 billion, citing a desire to "accelerate" an ongoing push to expand its artificial intelligence capabilities. Last year, Meta spent $28.1B.
In a call with analysts, Chief Executive Mark Zuckerberg, who previously backed strict cost-cutting measures throughout much of 2023, said that the increased investments were needed to help Meta become "the leading AI company in the world."
"[S]uch a narrative results in a slight reduction in forward revenue trends," analysts at Goldman Sachs (NYSE:GS) said in a note to clients.
Spending around the development of AI is set to also be a key focus when Meta peers Microsoft and Alphabet report their latest returns after the closing bell on Thursday.
3. IBM shares dip following mixed earnings, HashiCorp deal announcement
International Business Machines (NYSE:IBM) reported a mixed set of first-quarter results and announced it had reached an agreement to acquire cloud software provider Hashicorp (NASDAQ:HCP) for $6.4 billion.
The technology group posted earnings per share (EPS) of $1.68, beating consensus estimates of $1.58. However, revenue for the quarter was slightly below expectations at $14.46 billion, missing projections of $14.51 billion.
Meanwhile, IBM also said it would buy HashiCorp for $35 per share in cash, as the company looks to take advantage of an AI-fuelled boom in demand for cloud software products. The acquisition price represents a 42.6% premium to the closing price of HashiCorp's shares on Monday.
Shares in IBM edged lower in after-hours trading.
4. U.S. economic growth seen slowing in first quarter - forecasts
U.S. economic activity is expected to have decelerated to a still solid pace in the first quarter thanks in large part to a resilient labor market and strong consumer spending.
The Commerce Department's reading of gross domestic product is seen slowing to 2.5% in the first three months of the year from 3.4% in the fourth quarter, in a sign that the U.S. remains more robust than other advanced economies despite a period of sticky inflation and elevated interest rates.
According to Reuters, economists have argued that American consumers moved to secure lower mortgage payments and businesses locked in refinanced debt prior to the tightening cycle, helping insulate themselves from higher rates. Firms, wary of losing workers after a period of labor shortages before and after the COVID-19 pandemic, have also been more reticent to let go of employees.
The GDP print will serve as a precursor to Friday's release of the personal consumption expenditures index excluding food and fuel, a measure closely watched by Federal Reserve officials. Signs of economic strength and lingering price pressures could impact expectations that the Fed may now choose to hold off on cutting rates down from more than two-decade highs until later this year.
5. Oil edges higher
Oil prices rose slightly in European trade on Thursday as traders digested middling cues from U.S. inventory data and geopolitical tensions in the Middle East.
Brent oil futures expiring in June edged up 0.2% to $88.16 a barrel, while West Texas Intermediate crude futures moved up 0.1% to $82.92 a barrel by 03:29 ET.
Official U.S. inventory data showed on Wednesday that oil stockpiles shrank by 6.4 million barrels in the week to April 19, largely ducking estimates for a build of 1.6 million barrels. But distillate stockpiles saw an unexpected, 1.6 million barrel build, while gasoline inventories shrank by a smaller-than-expected 0.6 million barrels.
Elsewhere, hopes remain that recent hostilities between Iran and Israel will not escalate into all-out war. While both countries carried out strikes against each other over the past two weeks, neither side gave any indication that it wanted to further escalate the violence.
Some traders have subsequently wound down expectations that worsening geopolitical tensions in the Middle East will disrupt oil supplies from the oil-rich region.