U.S. stocks fell sharply Wednesday morning as new data showed the economy contracted for the first time since 2022 and investors braced for a deluge of earnings.
The Nasdaq led the decline, down 2.6% shortly after the opening bell, while the S&P fell 2%. The Dow Jones Industrial Average sank 701 points, or 1.7%.
Microsoft (MSFT-1.97%) and Meta (META-3.78%) report earnings after the bell, while two major economic reports — the advance estimate of first-quarter GDP and the Employment Cost Index — were released before the bell.
Here’s what to watch today.
The U.S. economy shrank for the first time since 2022, as rising imports weighed on GDP and inflation ran hotter than expected.
According to the Bureau of Economic Analysis’s advance estimate, gross domestic product contracted at an annualized rate of 0.3% in the first quarter — steeper than the 0.2% decline economists had forecast. The drop marked a sharp reversal from the 2.4% growth rate logged in the final quarter of 2024.
Prediction markets now point to strong belief that a recession is on the way — or already underway.
Visa (V-0.81%) posted a strong Q2, with non-GAAP EPS up 10% to $2.76 and revenue rising 9% to $9.6 billion. Payments volume grew 8%, cross-border volume rose 13%, and the company announced a $30 billion buyback. Still, the stock moved lower premarket — perhaps because the beat was already baked in. Visa shares are up 25% in the last 12 months.
Starbucks (SBUX-9.15%) shares tumbled 8% after reporting a rough quarter. U.S. comparable sales dropped 2% on a 4% decline in transactions, while international operating income fell 7%. Overall EPS sank 50%. Executives blamed restructuring costs and bad weather, but flat China sales and shrinking foot traffic point to a broader consumer slowdown. Shares sank 9% premarket.
Yum Brands (YUM-0.99%) delivered a solid quarter: EPS rose 13% as strength at Taco Bell and KFC offset weakness at Pizza Hut. CEO David Gibbs credited Yum’s global reach, digital momentum, and a new AI partnership with Nvidia (NVDA-3.87%).
Mondelez (MDLZ+3.75%) also posted strong results, with organic revenue up 4.2% and EPS nearly 9% higher. Emerging markets drove growth, while North America held steady. Cookies and chocolate, it turns out, remain a resilient indulgence even as pricier café visits lose steam.
Booking Holdings (BKNG-1.97%) beat expectations with 8% revenue growth and a 7% increase in gross bookings. Alternative accommodations outpaced traditional hotels, and the company saw a big jump in flight bookings. The results stand in contrast to recent airline warnings, hinting that travelers may be shifting how — but not whether — they spend.
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