Stock Market Today: Meta Earnings Spark Major Rally on Wall Street
The Facebook parent's quarterly results overshadowed a worse-than-expected reading on Q1 gross domestic product.
It was a busy day on Wall Street as investors sifted through an onslaught of high-profile earnings reports, including from Facebook parent Meta Platforms (META).
And despite data that showed slowing economic growth and stubbornly high inflation, all three major indexes jumped out of the gate – and ran higher into the close.
Meta delivered the most anticipated earnings report overnight. The Facebook parent said first-quarter revenue was up 3% year-over-year to $28.6 billion – its first annual top-line increase since Q1 2022 – thanks to solid ad revenue. Additionally, Facebook's daily active users were up 4% over the year prior to 2.04 billion.
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"Meta has seen its valuation receive another injection of goodwill as investors breathe a sigh of relief at the sight of a growing advertising revenue line," says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown. "Growth is more sluggish than is ideal, but it's ultimately better than expected." META stock finished the day up 13.9%.
On the economic front, the initial reading for first-quarter gross domestic product (GDP) showed the economy grew by 1.1% from January to March. True, this was slower than the 2.6% increase seen in Q4 and came in below expectations, but it does show that the U.S. economy is still expanding.
Additionally, the data showed that personal consumption jumped to 3.7% in Q1 from 1% in Q4, and that personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation that tracks consumer spending, rose 4.2% year-over-year, more than economists were expecting.
"U.S. stocks are rallying on strong earnings and on optimism that the economy will gradually soften and bring down inflation," says Edward Moya, senior market strategist at currency data provider OANDA. "The consumer is still in too good of shape for the recession to start in the second quarter. The Fed will be able to move forward with one, perhaps two more rate hikes, but then that should be it."
At the close, the Nasdaq Composite was up 2.4% at 12,142, the S&P 500 was 2.0% higher at 4,135, and the Dow Jones Industrial Average had gained 1.6% to 33,826.
Marijuana stocks rally on SAFE Banking news
Cannabis stocks jumped today on news that both Republican and Democratic lawmakers from each chamber of Congress have reintroduced the SAFE Banking Act. The legislation, which helps improve cannabis companies' access to finance, has been passed by the House of Representatives seven times already, but has failed to make it through the Senate. The latest legislation will next head to the Senate Banking Committee.
The bipartisan support for the bill shows that, regardless of personal views, these lawmakers "are recognizing that change is needed and they are taking an historic step forward with the introduction of SAFE in the Senate," says Morgan Paxhia, co-founder of cannabis investment fund $PSDN ETF and managing director and co-founder of Poseidon Investment Management. "This is the first time a hearing in the Senate will have happened around cannabis banking reform."
What's more, "poll after poll show the majority of Americans believe that cannabis should be legal," Paxhia says. "As of April 2023, we have 22 adult-use legal states and 41 medical cannabis states. The industry generated an estimated $26 billion in legal sales last year, according to Headset. Further, the most recent Vangst jobs report notes there are 417,493 Americans employed in cannabis."
The news sent a number of marijuana stocks soaring, with Aurora Cannabis (ACB, +4.4%), Canopy Growth (CGC, +3.2%) and Cronos Group (CRON, +6.4%) among those closing higher.
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