Technology and tech-esque stocks were the vanguard for a wild (and broad) stock-market rally Thursday that largely ignored an unexpected contraction in U.S. economic activity.
This morning, the Commerce Department reported that U.S. gross domestic product declined at a 1.4% annualized pace during the first quarter of 2022, falling far shy of the 1% gain that economists, on average, expected. However, several experts noted that it wasn't all bad news; a 2.7% rise in consumer spending and other metrics made the report more noise than omen.
"Huge miss on GDP this morning, but just looking at the headline [number] is misleading; we'd rate the report neutral overall," says Cliff Hodge, chief investment officer for registered investment advisory firm Cornerstone Wealth, who believes the report was overall marginally net-bullish for risk assets. "Trade, inventories and government spending all dragged, but the consumer held up and business investment was strong.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The big headline miss also gives the Fed some breathing room," he adds.
Investors and traders seemed more occupied with the earnings calendar. Facebook parent Meta Networks (FB, +17.6%) rocketed higher despite missing revenue expectations; bulls instead celebrated a wide earnings beat ($2.72 vs. $2.56 est.) and a return to user growth. Specifically, the Facebook app's daily active user count grew by 4%, to 1.96 billion, following a thin 1 million decline in Q4 2021.
Semiconductor firm Qualcomm (QCOM, +9.7%) delivered a monster quarter, too. Growth in all four major chip markets sent revenues and earnings per share up 41% and 69% year-over-year, respectively, to easy beat estimates. That news stirred the entire semiconductor industry, with rivals including Nvidia (NVDA, +7.4%) and Advanced Micro Devices (AMD, +5.6%) up big.
Apple (AAPL, +4.5%) and Amazon.com (AMZN, +4.7%) were also bid higher ahead of their quarterly reports, due out after Thursday's close. The latter plunged 10% in early after-hours trading after reporting a $2 billion first-quarter loss and delivering a weak Q2 revenue forecast. The former had yet to report as of this writing.
Strength in the technology (+4.0%) and communication services (+4.0%) sectors lifted the recently battered Nasdaq Composite 3.1% to 12,871. The S&P 500 closed up 2.5% to 4,287, while the Dow Jones Industrial Average gained 1.8% to 33,916.
Other news in the stock market today:
- The small-cap Russell 2000 climbed 1.8% to 1,917.
- Reports that Germany is open to a Russian oil embargo sent U.S. crude oil futures up 3.3% to $105.36 per barrel.
- Gold futures edged up 0.1% to settle at $1,891.30 an ounce.
- Bitcoin continued its recent recovery, gaining 2.9% to $39,969.33. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- McDonald's (MCD) improved by 2.9% after the fast food giant reported earnings. While MCD's decision to suspend operations in Russia cost it $127 million, or 13 cents per share, in its first quarter, the company still brought in adjusted earnings of $2.28 per share – more than the $2.17 per share analysts, on average, were expecting. Revenue of $5.7 billion also exceeded expectations, as did U.S. same-store sales growth of 3.5%.
- PayPal Holdings (PYPL, +11.5%) reported adjusted earnings of 88 cents per share in its first quarter, in line with the consensus estimate, on higher-than-anticipated revenue of $6.5 billion. PYPL also lowered its full-year guidance – now calling for revenue growth of 11%-13% from its prior forecast for 15%-17% – amid "more normalized consumer e-commerce spending," said CEO Dan Schulman in the company's earnings call. "Despite the weak guidance, we expect PayPal to continue to show steady long-term growth in payment volumes as it adds merchants, signs additional partnerships, increases the number of transactions per customer, and benefits from the shift to digital payments," says Argus Research analyst Stephen Biggar (Buy).
- Teladoc Health (TDOC) plummeted 40.2% after the telemedicine company recorded a net loss of $6.7 billion, or $41.58 per share, in its first quarter – due largely to a $6.6 billion impairment charge – on revene of $565.4 million, below the $569 million analysts were expecting. TDOC also lowered its full-year revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) outlooks amid higher costs and longer sales cycles for businesses. Still, Oppenheimer analyst Michael Wiederhorn maintained an Outperform (Buy) rating on TDOC stock. " Overall, although the market has become extremely competitive around customer acquisition, we still believe TDOC is positioned to outlast the irrational behavior from its smaller competitors," the analyst writes in a note to clients.
37 Ways to Earn Up to 9% on Your Money
2022 has flipped the script on income investors, for the worse, but also for the better.
An aggressive Federal Reserve, finally feeling comfortable with the idea of raising its benchmark rate, has sent yields on bonds soaring (and prices, which move in the opposite direction, plunging). However, dividend stocks – especially those of the higher-yield persuasion – have done just dandily; the same Fed moves, as well as worries about U.S. and Chinese economic growth, have dented growthier firms and sent many investors looking for more defensive equities.
Still, regardless of how you typically like to generate investment income, there are attractive opportunities right now in every corner of the market – bonds, regular stocks, even special classes such as master limited partnerships (MLPs) and closed-end funds (CEFs).
And we can introduce you to those opportunities all in one place.
Check out our recent "yieldfest": A look at 37 different ways to produce some investment cash, from extremely low-risk money-market funds to exotic high-yield funds.
Disclaimer
Kyle Woodley was long AMZN, AMD, FB, NVDA and PYPL as of this writing.
-
Should You Change Your Estate Plan Before the Election?You might need to modify your estate plan before the election — or at least before a new administration.
-
When Should Retirees Consider a Donor-Advised Fund?Charitable giving in retirement isn't right for everybody. But in certain situations, a tax-efficient donor-advised fund (DAF) may be well worth considering.
-
Stock Market Today: Stocks Waver on Resilient Employment DataA private reading on payrolls had markets rethinking rate-cut bets just days ahead of the monthly jobs report.
-
Stock Market Today: Stocks Drop, Oil Spikes After Iran Attacks IsraelA massive port strike and dismal economic data also weighed on the main indexes Tuesday.
-
Stock Market Today: Stocks Gain After Powell Talks Rate CutsA late-day burst of buying power helped the main indexes close higher for the day, month and quarter.
-
Stock Market Today: Dow Hits New High After Upbeat Inflation DataThe Fed's preferred inflation gauge continues to cool. Markets shift focus to next week's jobs report.
-
What Stocks Are Politicians Buying and Selling?Some of the trades made by members of the House and Senate might surprise you.
-
Stock Market Today: S&P 500 Hits New High as Micron SoarsThe main indexes gained ground Thursday as strong earnings from memory chipmaker Micron fueled AI optimism.
-
Stock Market Today: Stocks Struggle Ahead of Rate-Cut CluesMarkets were mixed before a speech by Fed Chief Powell slated for tomorrow morning.
-
Stock Market Today: Visa's the Worst Dow Stock After DOJ SuesThe blue chip stock sold off after the Justice Department accused Visa of monopolizing the debit card market.
