Apple Earnings, Bank Stocks Spark Relief Rally

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Stocks rallied hard Friday despite a stronger-than-expected jobs report.

A significant driver behind today's broad market gains was an impressive earnings report from mega-cap tech giant Apple (AAPL), while a rebound in regional bank stocks also lifted sentiment.

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Ahead of the opening bell, the Bureau of Labor Statistics said the U.S. added 253,000 jobs in April, blowing past estimates for an increase of 185,000. The unemployment rate ticked down to 3.4% from 3.5%, while wage growth was up 0.5% month-over-month and 4.4% year-over-year.

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Many of Wall Street's top minds were quick to chime in on the April jobs report, including Matt Peron, director of research at Janus Henderson Investors. "The jobs report was uncomfortably strong for policymakers who are trying to tame inflation," Peron says. "The best you can say from today's report is that job growth is slowing when looking at the average over the past few months. However, wages were stubbornly high and that's a key aspect of the report for the Fed and markets."

So, while today's data does help ease recession worries, it creates uncertainty as to how long the Fed will keep interest rates elevated in its efforts to rein in inflation. Nevertheless, the Dow Jones Industrial Average jumped 1.7% to 33,674, the S&P 500 soared 1.9% to 4,136, and the Nasdaq Composite added 2.3% to 12,235. The reason: Apple stock.

Apple earnings

Shares of the blue chip stock jumped 4.7% on Friday after the company reported better-than-expected fiscal Q2 earnings and revenue thanks to record quarterly sales for both its iPhone and services segments. Apple also hiked its dividend by 4% and said it is boosting stock buybacks by an additional $90 billion.

Apple wasn't the only stock making an outsized move today. After being walloped all week long, several regional bank stocks staged massive relief rallies. PacWest Bancorp (PACW) soared 81.7%, Western Alliance (WAL) surged 49.2% and Zions Bancorp (ZION) climbed 19.2%.

Today's jobs data and AI stocks

There were some key figures in today's jobs report that caught the eye of Andrew Crapuchettes, CEO of RedBalloon. "The number of people employed over the past year is up 3 million, or 1.9%, and wages are up 4.4%," Crapuchettes wrote in a blog post. "Total unemployed since last year is down 311,000, or 5.2%." And this, the executive adds, is "likely why we see such a sudden rise in AI. There aren't enough people to get the job done, and AI is one avenue businesses are exploring to fill in the gaps."

Plenty of firms are already employing artificial intelligence. A study by IBM found that in 2022, 35% of companies were using AI in their businesses, with another 42% reportedly exploring AI. These figures will likely continue to increase as AI gains in popularity, and will boost the artificial intelligence market in the process. Indeed, the global AI market is projected to grow at an annual rate of 37.3% through 2023, according to Grand View Research.

Investors wanting to capitalize on this rapid growth have plenty of opportunities at their disposal. But when looking for the best stocks to buy, it's important to focus on high-quality names like those included in Kiplinger's list of the best AI stocks.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.