Stocks Rise On Strong Earnings, Expectation Of Fed Rate Hikes Ending: Analyst Says 'No Earnings Recession In Cards Yet'

Zinger Key Points
  • Strong tech earnings and disappointing Q1 GDP data set the mood on Thursday.
  • Tech and social media strongly performed. Meta spiked 15% on upbeat earnings and strong guidance.

U.S. equities rallied across the board on Thursday, on the back of positive corporate earnings and expectations that a weaker-than-anticipated first-quarter GDP result will prompt the Fed to conclude rate hikes in May and later reverse its policy. 

Tech outperformed, fueled by optimism sparked by Microsoft Corp.'s MSFT and Meta Platform's META strong earnings.

Cues From Thursday's Trading:

All major U.S. equity indices traded deeply in the green, with both the S&P 500 index and the Dow Jones Industrial Average up by 1%, while the tech-heavy Nasdaq 100 soared 1.7% reclaiming the 13,000 level again. 

U.S. Indices' Performance On Thursday
Index Performance (+/-)   Value
Nasdaq 100 +1.7%   13,090.35
S&P 500 Index +1.1%   4,108.18
Dow Industrials +1.0%   33,613.01

Analyst Color: Despite worries concerning a potential recession, companies have shown profit growth. “The most important consideration is that while recession fears are still very much discussed, there is no earnings recession in the cards yet,” said fund manager Louis Navellier.

He also noted that food companies are increasing prices, which could turn out to be negative for inflation expectations. The stalemate over raising the debt ceiling also kept traders on the sidelines, he noted. Since then, the House has passed a bill to raise the ceiling, but it remains to be seen whether President Joe Biden will approve the legislation, given his disagreement over the spending cuts that were included as part of the bill.

Thursday's Trading In Major US Equity ETFs: In midday trading on Thursday, the SPDR S&P 500 ETF Trust SPY was 1.3% higher to $409.60, the SPDR Dow Jones Industrial Average ETF DIA rose 0.9% to $336.06 and the Invesco QQQ Trust QQQ was 2.2% higher to $318.80, according to Benzinga Pro data.

Almost all U.S. equity sectors were positive, except for the Energy Select Sector SPDR Fund XLK and the Health Care Select Sector SPDR Fund XLV

The Communication Services Select Sector SPDR Fund XLC skyrocketed 5.5%, supported by a 15% gain in META. 

Other-rate sensitive sectors, such as the Consumer Discretionary Select Sector SPDR Fund XLY, the Technology Select Sector SPDR Fund XLK, and the Real Estate Select Sector SPDR Fund XLRE, all experienced gains in between 1.4% and 2%. 

Latest Economic Data:

  • The U.S. GDP rose at a 1.1% annualized pace in the first quarter of 2023, well below analyst expectations of 2% growth, according to advance estimates released Thursday by the Bureau of Economic Analysis.

The Labor Department reported a fall of 16,000 in weekly jobless claims to 230,000. The figure came in lower than expectations of 245,000. 

The price consumption expenditure component of the report saw a new acceleration in the quarter, from 3.7% in Q4 2022 to 4.2%. 

The National Association Of Home Builders released the pending home sales index for March showing a decline of 5.2% month-over-month in March 2023, the first drop since November 2022 and well below market expectations of a 0.5% rise.

The Kansas City Fed’s Manufacturing Production index plummeted to a negative 21-point reading in April 2023 from 3 in the previous month, hitting the lowest level since May 2020 and below market expectations of 3. 

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Stocks In Focus:

  • Meta Platforms, Inc. META soared 15% on its better-than-expected results after the company issued strong guidance for the current period. 
  • Shares of other social media platforms rose in sympathy, with Snap, Inc. SNAP up 5.2% and Pinterest, Inc. PINS up 4.1%.
  • eBay, Inc. EBAY and Roku, Inc. ROKU also climbed in reaction to their earnings.
  • Eli Lilly & Co. LLY rose 2% despite reporting weaker-than-predicted earnings last quarter, as the company raised its full-year profit forecast. 
  • Wolfspeed, Inc. WOLF tumbled over 17% following its first-quarter earnings announcement.
  • Comcast Corp. CMCSA rallied 8% on its upbeat Q1 earnings. 
  • AbbVie, Inc. ABBV fell 8% as the drug manufacturer missed earnings expectations. 
  • Bristol-Myers Squib Co. BMY fell 2% as revenues declined and missed expectations. 
  • Mastercard, Inc. MA saw some marginal gains after the company reported better-than-expected results in Q1. 
  • Caterpillar, Inc. CAT fell 2.2% despite an earnings beat as inventory data suggested demand for heavy equipment might have peaked. 
  • Hasbro, Inc. HAS skyrocketed 13% as the company's Q1 results far exceeded expectations.  
  • Amazon, Inc. AMZN, Amgen, Inc. AMGN, Beazer Homes USA, Inc. BZH, Capital One Financial Corp. COF, First Solar, Inc. (NASDAQ FSLR), Intel Corp. INTC, and Pinterest, Inc. PINS are among the companies reporting after the market close.
  • Commodities, Bonds, Other Global Equity Markets:
  • Crude oil ticked 0.7% higher, with a barrel of WTI-grade crude dropping to $74.8. The United States Oil Fund ETF USO was 0.7% higher to $65.8 per share.  

Treasury yields rocketed, with the 10-year yield rising by 6 basis points to 3.51% and the two-year yield up 11 basis points to 4.06%. The iShares 20+ Year Treasury Bond ETF TLT was 0.9% lower on the day. 

The dollar slightly strengthened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, dropped 0.2% to 1.1011.   

European equity indices closed all in the green, buoyed by positive earnings. The iShares MSCI Eurozone ETF EZU rose 0.6%. 

Gold fell 0.1% to $1,987/oz. The SPDR Gold Trust GLD was flat at $184.8. Silver ticked 0.1% up to $24.91, with the iShares Silver Trust SLV rising 0.2% to $22.89 per share. Bitcoin BTC/USD rose 2.8% to $29,215.

Staff writer Piero Cingari updated this report midday Thursday. 

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