NEW YORK, April 28 ― The tech-heavy Nasdaq led a Wall Street rally yesterday as a strong quarterly report from Facebook parent Meta Platforms Inc overshadowed concerns over slowing US economic growth.
Shares in Meta closed up 13.9 per cent after touching their highest level in more than a year after the company forecast quarterly revenue above estimates, and CEO Mark Zuckerberg said AI was increasing traffic to its services and boosting ad sales.
As a result the S&P 500 communication services index ended up 5.5 per cent for its biggest one-day percentage gain since February 2022. Along with Meta, it got a boost from Alphabet Inc, which reported upbeat results earlier this week, while Comcast rose 10.3 per cent after its financial results impressed yesterday.
“Facebook earnings last night and more broadly largecap earnings continue to surprise to the upside,” said Mona Mahajan, senior investment strategist at St. Louis based Edward Jones.
“There were big expectations going into earnings with these sectors already outperforming so there was a little bit of hesitation about whether they would disappoint. In fact, a lot of these business models proved pretty resilient,” she said. “And the other part of the story is that a lot of companies that are cash rich have been issuing buyback programmes.”
After ending the regular session up 4.6 per cent Amazon.com Inc were up another 7.6 per cent in after-hours trading when it reported quarterly revenue ahead of estimates after the close.
The Dow Jones Industrial Average rose 524.29 points, or 1.57 per cent, to 33,826.16, the S&P 500 gained 79.36 points, or 1.96 per cent, to 4,135.35 and the Nasdaq Composite added 287.89 points, or 2.43 per cent, to 12,142.24.
While the S&P and the Dow registered their biggest daily percentage gains since Jan 6, the Nasdaq boasted its biggest single-day advance since March 16.
Of the S&P 500's 11 major sectors the biggest gainer was communications services followed by consumer discretionary, up 2.8 per cent while smallest gainer was energy, which advanced just 0.5 per cent.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina noted that economic data released on Thursday told a less positive story than earnings reports.
It showed US economic growth slowed more than expected in the first quarter as an acceleration in consumer spending was offset by businesses cutting back on inventory investment.
“All things being equal the macro data this morning were very negative. With the market up this much after that data it shows that investors are looking past macro ... Earnings reports have been very good. Its definitely not irrational exuberance,” said Zaccarelli.
Expectations for first-quarter earnings have drastically improved, with analysts projecting a 2.4 per cent year-over-year drop for profits at S&P 500 companies versus the 5.1 per cent decline forecast at the start of the earnings season, according to analyst estimates gathered by Refinitiv.
Even as slower GDP growth reflected a drag from weak inventory investment, the Federal Reserve still is expected to raise interest rates by another 25 basis points next week.
“Generally the economy looks like its decelerating. We think as the Fed continues with maybe one more rate hike next week we’ll start to see some more deceleration. Our base case is for a mild economic downturn in the second half,” said Edward Jones' Mahajan.
Eli Lilly and Co advanced 3.7 per cent after raising its full-year profit forecast, while Comcast rose soared as it beat estimates for quarterly profit, thanks to broadband services demand and higher theme park attendance.
EBay Inc climbed 5.1 per cent after the e-commerce company forecast current-quarter revenue above projections.
AbbVie Inc ABBV.N fell about 8 per cent after the drugmaker missed quarterly revenue estimates for its newer treatments, while heavy machinery maker Caterpillar Inc dipped as a flat order backlog signalled demand may have peaked.
Advancing issues outnumbered declining ones on the NYSE by a 3.26-to-1 ratio; on Nasdaq, a 1.89-to-1 ratio favoured advancers.
The S&P 500 posted 19 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 41 new highs and 200 new lows.
On US exchanges 10.77 billion shares changed hands compared with the 10.41 billion average for the last 20 sessions. ― Reuters
