Investing.com -- Investors are awaiting U.S. economic growth data, all while digesting results from Facebook owner Meta and looking ahead to Amazon's latest earnings. Elsewhere, House Republicans pass a new debt ceiling bill, but the political wrangling in Washington over the issue looks to be far from finished.
1. Growth data on the horizon
U.S. stocks are seen opening higher on Thursday, as investors await the release of key economic data and gauge renewed concerns over the health of the country's banking sector.
By 05:15 ET (09:15 GMT), the Dow futures contract was up 78 points or 0.23%, S&P 500 futures traded 20 points or 0.49% higher, and Nasdaq 100 futures rose 105 points or 0.81%.
Growth in the U.S. is projected to have slowed to 2.0% annually in the first quarter, according to Reuters projections, down from 2.6% in the prior three-month period. Economists anticipate that relative weakness in inventories and exports will be countered by an uptick in consumption in the world's biggest economy.
The Federal Reserve's recent aggressive string of interest rate hikes is also expected to show signs of weighing on broader activity. Over the past year, the U.S. central bank has lifted borrowing costs at an unprecedented clip in an attempt to cool red-hot inflation.
Next week, the Fed is widely tipped to increase rates by another 25 basis points, which would bring the federal funds target to a range of 5% to 5.25%. However, officials may be mulling over a pause in the tightening cycle to give themselves time to examine the impact of last month's turmoil in the financial services sector.
A sharp dip in shares of regional lender First Republic has stoked fresh worries that the banking tumult may only be in remission, and not yet completely eradicated. First Republic Bank (NYSE:FRC), which reported $100 billion in customer withdrawals in March, saw its stock tumble by 29.75% on Wednesday, extending a series of sharp declines throughout this week.
2. Meta Reels in ad sales
Growth in advertising sales has returned to Facebook parent Meta Platforms, Inc. (NASDAQ:META) for the first time in almost a year, which chief executive Mark Zuckerberg credited to solid performance of Reels, the tech giant's answer to the craze for TikTok-like short-form videos.
Ad revenue moved higher by 4.1% in the January to March period to $28.10B, topping Bloomberg consensus estimates of $26.76B. The total top-line figure in Meta's second quarter increased by 2.6% year-on-year to $28.65B, also beating expectations.
In a call with analysts, Zuckerberg said Reels was helping drive overall app engagement, adding that the company believes it is gaining share in the short-form video market.
Shares in Meta, which also delivered a higher-than-anticipated second quarter revenue forecast of $29.5B to $32B, gained more than 11% in after-hours trading on Wednesday.
The initial signs of recovery in advertising at Meta may help assuage some investor concerns over the heavy spending the firm has doled out on developing Zuckerberg's metaverse project. The slowdown in advertising and the big bet on artificial intelligence has proved costly for Meta, leading it to heavily slash expenses, particularly through tens of thousands of layoffs.
Zuckerberg has previously defended the belt-tightening as a necessary part of what he has called a "year of efficiency." But his message to analysts was noticeably more upbeat on Wednesday.
"When we started this work last year, our business wasn't performing as well as I wanted. But now we're increasingly doing this work from a position of strength," Zuckerberg said.
3. Tech earnings parade marches on
Amazon.com, Inc. (NASDAQ:AMZN) will report its first quarter results after the close of U.S. trading on Thursday, rounding out a week of earnings from some of the biggest names in the U.S. technology industry.
Investors will be particularly keen to see just how deep a recent downturn in sales growth has been at the e-commerce behemoth's key cloud-computing division.
Amazon Web Services, or AWS, has in the past accounted for the lion's share of the group's total operating profit. But the unit has seen its revenue growth slump to 27% earlier this year, the lowest level since Amazon began separating cloud results from the broader company, as potential customers rein in technology spending amid worries over an impending economic downturn.
On Wednesday, Amazon also unveiled layoffs at both AWS and its human resources division as part of a sweeping round of job cuts that are estimated to impact 9,000 workers. Analysts expect the reduced expenses will help improve margins in the second half of 2023.
Along with Meta, Microsoft (NASDAQ:MSFT) and Google parent Alphabet (NASDAQ:GOOGL) have also posted their latest earnings this week, with both sets of returns pointing to continued resilience in cloud spending and advertising sales.
4. U.S. House passes debt ceiling bill
The U.S. House of Representatives approved a bill on Wednesday that would raise the country's debt ceiling by $1.5 trillion as the threat of an upcoming default looms.
In a narrow 217-215 vote that had zero Democratic support, the Republican-controlled lower chamber of the U.S. Congress passed a measure that featured cuts to government spending plans backed by the Biden administration, including a proposed cancellation of some student loan debt.
Lawmakers now face a deadline, estimated to be sometime in June, for the federal government to avoid default. But the politics around the debt ceiling remain deeply complex, with Biden and Democratic leaders in Congress already accusing Republicans of using the issue to gain concessions on key policy areas.
Kevin McCarthy, the Republican House Speaker credited with shepherding through the passage of the bill, has said that Biden "should sit down and negotiate." For his part, Biden has said he is happy to meet with McCarthy, but not over whether the debt limit gets extended.
However the matter shakes out, fears are growing that the U.S. government may not be able to meet its debt obligations should the talks over $31.4T borrowing limit fail. Many investors are racing to snap up short-term government debt that matures before the ominous so-called "X-date" when extraordinary measures put in place by the Treasury Department earlier this year to prevent a default expire. Debt that matures in midsummer, meanwhile, is being avoided, causing massive distortions in the short-term T-bill market.
5. U.S. crude inventories fall, but oil demand concerns persist
Oil prices edged higher on Thursday due in part to a drop in weekly U.S. crude inventories that was far bigger than anticipated.
U.S. crude stocks decreased by about 5.1 million barrels last week, following a 4.6M-barrel drawdown in the prior week, according to data from the Energy Information Administration released late Wednesday. The reading was expected to show a 1.5M-barrel decrease.
By 05:17 ET, U.S. crude futures were 0.19% higher at $74.44 a barrel, while the Brent contract climbed 0.30% to $77.95 per barrel.
But both benchmarks are on course to post losses of almost 4% this week, close to a one-month low, as concerns remain over how a possible slowdown in economic growth will hit future oil demand. Oil prices have largely erased gains made on the back of a surprise production cut by the Organization of Petroleum Exporting Countries and allies at the start of this month.
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