Big tech sold off in late hours after Meta Platforms Inc.’s disappointing outlook raised concern on whether the artificial-intelligence euphoria that has powered the bull market has run too far.

A US$250 billion exchange-traded fund tracking the Nasdaq 100 (ticker: QQQ) got hit as the Facebook parent tumbled more than 10 per cent after boosting its spending estimates for the year and projecting sales that were below analyst expectations. In the run-up to the results, equities struggled to gain traction as traders positioned for economic data that will help shape the views on the Federal Reserve’s next steps.

To Mark Hackett at Nationwide, while the cohort of seven tech megacaps has done well in the last two years because of their superior earnings growth relative to the broader market, this advantage could decrease in 2024 and even more significantly in 2025.

“The ‘Magnificent Seven’ are not nearly as powerful as they once were, and this broadening of the market is creating pockets of opportunity for the rest of the S&P 500,” he noted. “We see this as a positive development for investors looking to diversify away from the recent market leaders,” he added.

The S&P 500 closed slightly above 5,070. Tesla Inc. surged 12 per cent after Elon Musk vowed to launch less-expensive vehicles. Nvidia Corp. tumbled over 3 per cent, halting a two-day rally. Treasury 10-year yields rose four basis points to 4.64 per cent. The yen weakened beyond 155 per dollar, fueling intervention jitters.

Meta reported revenue of $36.5 billion in the first quarter, an increase of more than 27 per cent over the same period a year ago. It was a small beat, as analysts were looking for revenue of $36.1 billion on average, according to estimates compiled by Bloomberg. Profit more than doubled to $12.4 billion or  earnings per share of $4.71.

But the Menlo Park, California-based social networking company also projected second quarter sales of $36.5 billion to $39 billion. Analysts expected $38.2 billion.

To Katrina Dudley at Franklin Templeton, valuations are fair — therefore companies need to continue to deliver on earnings growth.

“For the market overall, we’ll be watching guidance,” said Matt Palazzolo at Bernstein Private Wealth Management. “While it’s good to know how companies did from January to March — it’s more important now to have a sense for managements’ expectations for the balance of the year.”

Interest rates staying elevated longer, along with economic uncertainty and geopolitical turmoil have lessened the appeal of some of the stock market’s cheapest strategies.

Investors this month have pulled some $200 million out of value based exchange-traded funds, according to data compiled by Bloomberg Intelligence. In contrast, growth stocks have attracted more than $3 billion in inflows — despite a shaky stock market that’s raised concerns of more downside to come. That diminished interest in cheap stocks comes on the heels of lackluster performances of common value products.

Meantime, a JPMorgan Chase & Co. indicator is flashing a resounding buy signal in U.S. stocks, after it hit a threshold that typically precedes better-than-average gains.

The bank’s U.S. Tactical Positioning Monitor hit a level that reflects an “attractive set-up” for the S&P 500, according to a team led by Andrew Tyler, JPMorgan’s head of U.S. market intelligence. 

The stock gauge has historically gained around 3 per cent in the subsequent 20 days after a similar four-week change in positioning, compared to a roughly 1 per cent gain in all periods, according to the note.

Corporate Highlights:

• Boeing Co. Chief Executive Officer Dave Calhoun said the embattled planemaker is making progress toward turning around its manufacturing and that it will hit its mid-decade cash-flow goal, even after reporting a major outflow in the first three months of the year it slows output
• B. Riley Financial Inc.’s auditors signed off on its annual report, while flagging concerns about weak internal controls.
• Amazon.com Inc. and Microsoft Corp.’s investments into artificial intelligence startups will get deeper scrutiny from the UK’s antitrust watchdog.
• AT&T Inc. beat analysts’ estimates for profit in the first quarter as it added more wireless phone customers than expected.
• Biogen Inc. reported first-quarter profit that beat expectations as the biotech giant’s new Alzheimer’s drug Leqembi gained traction and cost cuts took hold.
• Visa Inc. reported a quarterly profit that beat Wall Street predictions as U.S. credit-card spending climbed.
• Humana Inc. pulled its guidance for next year amid mounting pressures in its Medicare business.
• Hasbro Inc. reported first-quarter earnings that beat estimates, a promising sign for the company’s turnaround efforts.
• Mattel Inc. reported a smaller-than-expected first-quarter loss, benefiting from fast sales of its Hot Wheels miniature cars and lower costs.
• Citigroup Inc. turned bearish on Molson Coors Beverage Co., expecting sales trends will weaken as benefits from last year’s Bud Light boycott fade.
• SunPower Corp. will eliminate more than 25 per cent of its workforce as the company copes with a prolonged slump in the rooftop solar business.

Key events this week:

• U.S. GDP, wholesale inventories, initial jobless claims, Thursday
• Microsoft, Alphabet, Airbus earnings, Thursday
• Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday
• U.S. personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
• Exxon Mobil, Chevron earnings, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 4 p.m. New York time
• The Nasdaq 100 rose 0.3 per cent
• The Dow Jones Industrial Average fell 0.1 per cent
• The MSCI World index rose 0.2 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.1 per cent
• The euro was unchanged at $1.0701
• The British pound rose 0.1 per cent to $1.2464
• The Japanese yen fell 0.3 per cent to 155.30 per dollar

Cryptocurrencies

• Bitcoin fell 3.6 per cent to $63,938.36
• Ether fell 2.4 per cent to $3,133.35

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.64 per cent
• Germany’s 10-year yield advanced nine basis points to 2.59 per cent
• Britain’s 10-year yield advanced nine basis points to 4.33 per cent

Commodities

• West Texas Intermediate crude fell 0.5 per cent to $82.93 a barrel
• Spot gold fell 0.1 per cent to $2,319.55 an ounce