Stock Market Update

[BRIEFING.COM] The S&P 500 rallied 2.5% on Thursday, as earnings reactions helped instill confidence in dip-buying efforts. The Nasdaq Composite rose 3.1%, the Dow Jones Industrial Average rose 1.9%, and the Russell 2000 rose 1.8%. 

After a shaky start in which the major indices, except the S&P 500, turned negative, the market kicked into higher gear in the afternoon. All 11 sectors in the S&P 500 closed higher with gains ranging from 1.1% (utilities) to 4.0% (information technology). 

Meta Platforms (FB 205.73, +30.78, +17.6%) had sort of a halo effect on the mega-caps, as shares surged 17.6% following its better-than-feared earnings report. Apple (AAPL 163.64, +7.07, +4.5%) and Amazon.com (AMZN 2891.93, +128.59, +4.7%) posted strong gains in front of their earnings reports after the close. 

Qualcomm's (QCOM 148.19, +13.09, +9.7%) results and guidance had a similar effect on the Philadelphia Semiconductor Index (+5.6%), while the 11% gain in PayPal (PYPL 92.09, +9.48, +11.5%) despite its downside guidance was viewed as a justification to buy other beaten-down growth stocks -- but not Teladoc (TDOC 33.51, -22.48, -40.2%), which cratered 40% on disappointing guidance. 

McDonald's (MCD 254.19, +7.05, +2.9%) and Merck (MRK 88.58, +4.17, +4.9%) also pleased investors with their earnings reports. Fellow Dow components Caterpillar (CAT 212.44, -1.52, -0.7%) and Amgen (AMGN 238.13, -10.66, -4.3%), however, closed lower despite beating EPS estimates. 

Of course, the notion that the market was simply due for a bounce from an oversold condition can't be understated. Encouragingly, too, the stock market did not appear fazed by the disappointing Advance Q1 GDP report that had marks of stagflation. 

Briefly, real GDP decreased at an annual rate of 1.4% in the first quarter (Briefing.com consensus +1.1%) while the GDP Chain Deflator increased by a larger-than-expected 8.0% (Briefing.com consensus +7.3%).

The Treasury market, however, did react in such a way that maintained expectations for the Fed to prioritize tighter policy to keep inflation pressures in check. The 2-yr yield rose seven basis points to 2.64%, and the 10-yr yield rose five basis points to 2.86%. The U.S. Dollar Index (103.59, +0.64, +0.6%) hit a 20-year high. WTI crude settled above $105 per barrel ($105.31, +3.56, +3.5%). 

Reviewing Thursday's economic data:

• Real GDP decreased at an annual rate of 1.4% in the first quarter (Briefing.com consensus +1.1%) while the GDP Chain Deflator shot up 8.0% (Briefing.com consensus +7.3%). Real final sales of domestic product, which exclude the change in private inventories, were down 0.6%.
  • The key takeaway from the report is that it will exacerbate concerns about the U.S. economy being at risk of slipping into an eventual recession at worst or at least entering a stagflation period that will necessitate tighter monetary policy to get inflation under control.
• Initial jobless claims for the week ending April 23 decreased by 5,000 to 180,000 (Briefing.com consensus 182,000). Continuing claims for the week ending April 16 decreased by 1,000 to 1.408 million, which is the lowest level since February 7, 1970.
  • The key takeaway from this report remains the same: jobless claims are near historically low levels, which is indicative of a tight labor market. The tightness in the labor market, though, will continue to fuel concerns about wage-based inflation pressures that can feed into more persistent, and broader, price inflation.

Looking ahead, investors will receive Personal Income and Spending for March, PCE Prices for March, the Q1 Employment Cost Index, the Chicago PMI for April, and the final University of Michigan Index of Consumer Sentiment for April on Friday.

• Dow Jones Industrial Average -6.7% YTD
• S&P 500 -10.0% YTD
• Russell 2000 -14.6% YTD
• Nasdaq Composite -17.7% YTD