Stocks fell Thursday after concerns about stagflation were raised by the latest U.S. economic data. The Dow dropped 375 points, while the S&P 500 and Nasdaq Composite also declined. U.S. GDP expanded less than expected in the first quarter and the personal consumption expenditures price index rose well above the previous quarter’s pace, leading investors to worry about slowing economic growth and rising inflation. Despite the day’s losses, major averages are on track for a winning week, with traders keeping an eye on Friday’s PCE reading.
Google parent company Alphabet reported better-than-expected first-quarter revenue growth, with ad sales at YouTube jumping 20%. This performance reassured Wall Street about the company’s core ads business and ability to generate profits from AI investments. In a show of confidence, Alphabet announced its first-ever quarterly dividend of 20 cents per share and plans to repurchase $70 billion in stock. The company’s stock rallied about 12% in extended trading, pushing Alphabet’s market cap past $2 trillion.
Microsoft is significantly increasing its spending in response to growing demand, including a shortage of data center infrastructure needed for deploying AI models. Chief Financial Officer Amy Hood announced that the company will ramp up capital expenditures in the current quarter. While Microsoft’s fiscal third-quarter results exceeded estimates, with a weaker-than-expected revenue guidance, the company remains challenged to meet the increasing demand for its products and services.
Paramount Global and Skydance Media are moving closer to a merger deal, with Skydance CEO David Ellison potentially being named CEO of Paramount Global. The deal, targeted for May, would see former NBCUniversal CEO Jeff Shell as president. However, one of the remaining challenges is Paramount Global’s renewal agreement with Charter Communications for CBS and its cable networks, which is important for Paramount’s valuation.
Southwest Airlines is considering changes to its long-standing single-class, open-seating policy. CEO Bob Jordan mentioned that the airline is exploring new initiatives, such as rethinking the way they seat and board aircraft. While no decisions have been made yet, analysts have previously suggested charging for premium seating or additional fees. However, Southwest’s chief commercial officer emphasized that the airline is not considering charging for checked bags, as it is a key selling point for the carrier.
In summary, investors started their trading day with news of falling stocks due to concerns about stagflation from the latest U.S. economic data. Alphabet’s strong performance, including its first-ever quarterly dividend announcement, reassured the market. Microsoft is increasing spending to meet rising demand, while Paramount Global and Skydance Media are getting closer to a merger deal. Southwest Airlines is considering changes to its seating and boarding policies. These developments are important for investors to monitor as they navigate the markets and make decisions in their trading activities.
