Joey Solitro
Investors were likely on pins and needles heading into Thursday's session after markets sold off sharply Wednesday. A slow start turned into a mixed finish, with blue chip stocks outperforming thanks to a positive earnings reaction for International Business Machines (IBM).
The first reading on second-quarter gross domestic product (GDP) showed the U.S. economy grew at an annual rate of 2.8%, far exceeding Q1's 1.8% rate and economists' expectations for 2% growth.
True, this is the first reading of Q2 GDP and there could be revisions down the road. But Matt Peron, global head of solutions at Janus Henderson Investors, says the data "does lend support to the soft-landing narrative."
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.
Peron adds that the report should also "provide some relief to stressed markets by showing that the second quarter was generally solid. However, we note that the economy does seem to be downshifting and that may cause continued volatility in the coming months."
Durable goods fall for the first time in five months
Elsewhere on the economic calendar, data from the Census Bureau showed durable goods orders dropped by 6.6% from May to June. As Wells Fargo economists Shannon Seery Grein and Tim Quinlan note, this is the worst durable goods reading since the start of the pandemic and the first decline in five months.
The economists add that while the sharp decline in new orders "overstates weakness in capital expenditures demand," they remain cautious considering companies are facing higher costs to finance the purchase of new equipment. Uncertainty surrounding the outcome of this fall's presidential election could also weigh on equipment demand in the near term, the economists say.
Buffett sells 52 million Bank of America shares
In single-stock news, Bank of America (BAC, -1.2%) made headlines after regulatory filings revealed Warren Buffett's Berkshire Hathaway (BRK.B, +0.1%) sold more than 52 million shares of the financial stock over a six-day period beginning July 17.
Buffett first gained exposure to BAC back in 2011 when he invested $5 billion to boost the big bank's finances following the Great Recession. He exercised warrants in 2017 and at the end of Q1 2024, Bank of America was the second-largest holding in the Berkshire Hathaway equity portfolio.
Given BAC was up 31% for the year to date through July 16, some of this selling may be the result of profit-taking. Or, along the same lines as why Buffett sold Apple shares earlier this year, it could also be for tax reasons.
IBM, Ford make notable post-earnings moves
The real action Thursday was on the earnings calendar. Shares of Chipotle Mexican Grill (CMG), for one, fell 1.9% even after the burrito chain beat analysts' top- and bottom-line expectations for its second quarter. The fast-casual restaurant chain's strong financial performance was driven by new store openings and an 11.1% increase in comparable-restaurant sales.
CFRA Research analyst Siye Desta downgraded CMG stock to Hold from Buy after earnings, saying the company's commitment to generous portions could negatively impact margins.
Ford Motor (F) stock was another post-earnings loser, plunging 18.4% for its biggest one-day drop since 2008 after the automaker fell short of earnings expectations for its second quarter. Despite the earnings miss, the company raised its full-year outlook for free cash flow.
On the plus side of the ledger, IBM stock rose 4.3% after the technology giant beat top- and bottom-line expectations for its second quarter and hiked its 2024 free cash flow forecast.
These increased free cash flow estimates are important for investors because companies will often allocate some of this available money to spend toward shareholder-friendly initiatives such as stock buybacks and dividends.
IBM's post-earnings pop helped the Dow Jones Industrial Average outperform, with the 30-stock index finishing up 0.2% to 39,935. The S&P 500 slipped 0.5% to 5,399 and the Nasdaq Composite added 0.9% to 17,181.
Related content
- Why This Economist Thinks the Fed Is Already Late to Cut Rates
- If You'd Put $1,000 Into IBM Stock 20 Years Ago, Here's What You'd Have Today
- Paris Olympics: 5 Sports-Related Stocks Going for Gold
-
Are You Leaving Money on the Table? Four Strategies to Free Up Stuck InvestmentsFrom forgotten 401(k)s to outdated asset allocations, here’s how stuck money can hurt your retirement.
-
COVID Aged Your Brain Faster, Even if You Didn't Get SickWhether you contracted COVID or not, your brain took a hit. Here's what that means for your health and what you can do about it.
-
Are You Leaving Money on the Table? Four Strategies to Free Up Stuck Investments
From forgotten 401(k)s to outdated asset allocations, here’s how stuck money can hurt your retirement.
-
A Taxable Brokerage Account May Be What Your Retirement Is MissingYou can supplement your retirement nest egg or save for other goals with a taxable brokerage account.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
Five Things to Do if You're Forced Into Early Retirement (and How to Reset and Recover)Developing a solid retirement plan — before a layoff — can help you to adapt to unexpected changes in your timeline. Once the initial panic eases, you can confidently reimagine what's next.
-
Five Ways to Adapt Your Charitable Giving Strategy in a Changing World: An Expert GuideEconomic uncertainty, global events and increasing wealth are shaping the charitable landscape this year. Here are the philanthropic trends and some tips that could help affluent donors optimize their impact.
-
Stocks Rally on Apple Strength: Stock Market TodayThe iPhone maker will boost its U.S. investment by $100 billion, which sent the Dow Jones stock soaring.
-
What to Know About Multisector ETFsMultisector bond funds allow investors to pick and choose among a wide array of assets.
-
I'm an Estate Planning Attorney: These Are the Two Legal Documents Everyone Should HaveEvery adult should have a health care proxy and power of attorney — they save loved ones time, money and stress if a sudden illness or injury leaves you incapacitated.
