The tech-heavy Nasdaq led a Wall Street rally on Thursday as a strong quarterly report from Facebook parent Meta Platforms Inc overshadowed concerns over slowing U.S. economic growth. Canada’s TSX also rose, though gains were more modest.
Shares in Meta closed up 13.9% 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% 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% after its financial results impressed on Thursday.
“Facebook earnings last night and more broadly large-cap 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 programs.”
After ending the regular session up 4.6%, Amazon.com Inc shares were up another 7.6% 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%, to 33,826.16, the S&P 500 gained 79.36 points, or 1.96%, to 4,135.35 and the Nasdaq Composite added 287.89 points, or 2.43%, 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% while smallest gainer was energy, which advanced just 0.5%.
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 U.S. 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% year-over-year drop for profits at S&P 500 companies versus the 5.1% 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.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 155.92 points, or 0.8%, at 20,522.64, after three straight days of declines.
On Wednesday, it posted its lowest closing level since April 10. Still, it has rallied about 15% since October.
“I continue to believe that the market bottomed in October,” said Steve Palmer, chief investment officer at AlphaNorth Asset Management.
“There is a huge amount of cash still on the sidelines. Everyone’s negative and they are going to start realizing that they’re missing the boat and that’s going to start coming back into the market.”
The Toronto market’s heavily-weighted financials sector gained 1.2% after it was pressured earlier in the week by revived concerns about the health of the U.S. banking sector.
Energy advanced 0.6% as oil settled 0.6% higher at US$74.76 a barrel, while the sector was helped by a gain of 3.4% for Suncor Energy Inc. The company bought the Canadian oil sands operations of French oil and gas major TotalEnergies for US$4.1 billion, with potential additional payments of up to $450 million.
All 10 major sectors ended higher but health care, which is dominated by cannabis stocks, was a standout. It advanced nearly 2% after a cannabis reform bill was reintroduced in the U.S. Congress.
Business jet maker Bombardier Inc was among the stocks that ended lower, falling 4.9%. The company reported negative $247 million in free cash usage even as it swung to a first-quarter adjusted profit.
Among individual stock moves in the U.S., Eli Lilly and Co advanced 3.7% 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% after the e-commerce company forecast current-quarter revenue above projections.
AbbVie Inc fell about 8% after the drugmaker missed quarterly revenue estimates for its newer treatments, while heavy machinery maker Caterpillar Inc dipped as a flat order backlog signaled 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 favored 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 U.S. exchanges 10.77 billion shares changed hands compared with the 10.41 billion average for the last 20 sessions.
Reuters, Globe staff
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