Dow, S&P 500 record best day in 7 weeks as tech stocks rally

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By Joy Wiltermuth and William Watts

Major stock indexes shrug off weekly losses

U.S. stocks finished sharply higher Thursday as investors piled into technology stocks following results from Facebook parent Meta Platforms that weren’t as bad as feared.

Investors also brushed off data that showed the U.S. economy contracted unexpectedly in the first quarter.

What happened

On Wednesday, the Dow rose 62 points, or 0.2%, while the S&P 500 gained 0.2% and the Nasdaq Composite failed to hold a bounce, ending the day with a loss of less than 0.1%.

However, the S&P 500 is down 5.4% so far in April, the Nasdaq Composite has lost about 9.5% and the Dow has shed 2.2% for the same stretch.

What drove markets

Major indexes recorded significant gains Thursday on optimism about earnings after results from Meta Platforms (FB). Though they weren’t well ahead of consensus, as revenue actually came in weaker than forecast, expectations were low given the 48% decline this year in the stock. Shares jumped 17.6%.

Meta’s better-than-forecast subscriber numbers sets the stage for two other megacap tech stock results due after the close Thursday, (AMZN) and Apple (AAPL). Though the stock-market decline for Amazon hasn’t been as severe as Meta’s.

“We are seeing a market that’s beginning to perhaps show some fundamental strength, in the sense that earnings are now coming into play,” said Peter Cardillo, chief market economist at Spartan Capital Securities, by phone.

“Yesterday, we had a very weak recovery, but with the S&P 500 now comfortably above the 4,200 level, this rally likely can continue for a bit longer,” he said, adding that the upswing could mean slightly less carnage in April for stocks, despite ongoing uncertainties.

Earlier this week, the S&P 500 was flirting with its worst April performance since 1970 when it dropped more than 6%, according to Dow Jones Market Data. At last check, it was down 5.4% on the month.

Investors also were weighing a first look at first-quarter economic growth, with gross domestic product showing a 1.4% annualized contraction after a 6.9% expansion in the final quarter of 2021. Economists surveyed by The Wall Street Journal had forecast 1% growth, but some had warned of the potential for a negative number.

As economists had warned, the decline was mostly due to a record international trade deficit, lower government spending and declining inventories, but robust consumer spending and businesses investment signaled the economy was still expanding at a steady pace.

“Earnings are coming out and they are really strong, even though companies are facing tough comps,” said Max Wasserman, founder and senior portfolio manager at Miramar Capital, near Chicago.

“The problem is on the macro side,” Wasserman said by phone, while pointing to supply-chain bottlenecks, high inflation, uncertainty about whether the Federal Reserve can tighten financial conditions without unleashing a recession and Russia’s war in Ukraine.

Given the tougher backdrop, he expects choppy markets for at least the next three months as the Fed looks to get inflation under control. He also sees the potential for another 5% to 10% drawdown for the S&P 500 over that stretch, as markets adjust to likely higher interest rates.

See:Fed’s half-percentage-point interest rate hike next week seen baked in the cake

The yen meanwhile slumped to a fresh 20-decade low after the Bank of Japan didn’t alter its easy monetary policy stance.

See: Dollar domination continues, as yen slumps to two-decade low

Which companies were in focus?

Other assets

–Steve Goldstein contributed reporting

-Joy Wiltermuth


(END) Dow Jones Newswires

04-28-22 1626ET

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