S&P 500 and Nasdaq 100 Rally to Record Highs on Earnings Optimism

The S&P 500 Index ($SPX) (SPY) on Thursday closed up +1.02%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +1.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.98%.  June E-mini S&P futures (ESM26) rose +1.01%, and June E-mini Nasdaq futures (NQM26) rose +0.95%.

Stock indexes rallied sharply on Thursday, with the S&P 500 and Nasdaq 100 posting new all-time highs and the Dow Jones Industrials posting a 1-week high.  Better-than-expected earnings results from Alphabet and Qualcomm supported gains in the broader market.  Alphabet rallied more than +9% after reporting Q1 revenue ex-TAC of $94.57 billion, above the consensus of $91.57 billion.  Qualcomm surged more than +15% to lead chipmakers higher after reporting stronger-than-expected Q2 adjusted revenue.  In addition, lower crude oil prices on Thursday lowered inflation expectations and bond yields, both of which are supportive of stocks. The 10-year T-note yield fell -5 bp at 4.38%. 

On the negative side, Meta Platforms fell more than -8% after issuing a capital expenditure forecast that was higher than expected.  Also, Microsoft closed down more than -3%, despite reporting Q3 results that beat expectations, as analysts expressed concern about the pace of growth in the company’s Azure cloud-computing business.

Stocks maintained their gains on Thursday after mixed US economic news. Weekly jobless claims fell to a 57-year low, while Q1 US GDP grew at a slower-than-expected pace. 

US weekly initial unemployment claims fell -26,000 to a 57-year low of 189,000, showing a stronger labor market than expectations of 212,000.  Weekly continuing claims fell -23,000 to a 2-year low of 1.785 million, showing a stronger labor market than expectations of 1.815 million.

US Mar personal spending rose +0.9% m/m, right on expectations. Mar personal income rose +0.6% m/m, stronger than expectations of +0.3% m/m.

The US Mar core PCE price index, the Fed's preferred inflation gauge, rose +0.3% m/m and +3.2% y/y, right on expectations, with the +3.2% y/y gain being the largest increase in 2.25 years.

The US Q1 employment cost index rose +0.9%, stronger than expectations of +0.8%

US Q1 GDP rose +2.0% (q/q annualized), weaker than expectations of +2.3%.  The Q1 core PCE price index rose +4.3%, stronger than expectations of +4.1% and the largest increase in 3 years.

The US Apr MNI Chicago PMI unexpectedly fell -3.6 to a 4-month low of 49.2, weaker than expectations of an increase to 54.9.

US Mar leading indicators fell -0.6% m/m, weaker than expectations of -0.2% m/m and the biggest decline in 11 months.

WTI crude oil prices (CLM26) fell from a 3-week high on Thursday and closed down by more than -1% amid concerns that higher oil prices are starting to weigh on economic growth, which could further depress demand for crude.  Crude prices initially rose on Thursday after Axios reported that President Trump will be briefed on new military options for action in Iran, signaling the potential for fresh escalation in the war.  US Central Command has prepared a plan for a "short and powerful" wave of strikes on Iran, likely infrastructure targets.   The US and Iran are locked in a battle for control of the Strait of Hormuz, with both sides blocking the waterway to gain leverage during an extended ceasefire.  The Strait of Hormuz remains essentially closed, threatening to deepen the global energy crisis, as flows of crude, natural gas, and oil products from the Persian Gulf have been cut off since the war began in late February.  The ongoing blockade could exacerbate global oil and fuel shortages, as about a fifth of the world’s oil and liquefied natural gas transits through the strait.  Goldman Sachs estimates that crude output in the Persian Gulf has been curtailed by about 14.5 million bpd, or more than 50%, so far in April, and that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, which could hit a billion bbl by June.

Kevin Warsh won the banking confirmation vote of the Senate Banking Committee on Wednesday, putting him on track to be confirmed as Fed Chair by the full Senate before Jerome Powell’s term ends on May 15.  Fed Chair Powell said after Wednesday’s FOMC meeting that he will continue to serve as Fed Governor “for a period of time to be determined.”  Mr. Powell’s seat on the Board of Governors doesn’t expire until 2028.

The markets are discounting an 8% chance of a -25 bp FOMC rate cut at the next FOMC meeting on June 16-17.

Earnings season ramps up this week with several Magnificent Seven technology stocks reporting.  Earnings results thus far have been supportive of stocks.  As of Thursday, 80% of the 247 S&P 500 companies that reported Q1 earnings have beaten estimates.  Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence.  Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.

Overseas stock markets settled mixed on Thursday.  The Euro Stoxx 50 recovered from a 3-week low and closed up +1.12%.  China's Shanghai Composite climbed to a 1.5-month high and closed up +0.11%.  Japan's Nikkei Stock Average closed down -1.06%.

Interest Rates

June 10-year T-notes (ZNM6) on Thursday closed up by +7.5 ticks.  The 10-year T-note yield fell -5.0 bp to 4.380%.  T-note prices found support on Thursday amid a -1% decline in WTI crude oil prices, which lowered inflation expectations.  Also, weaker-than-expected US Q1 GDP is supportive for T-note prices. 

Gains in T-notes were limited on Thursday after US weekly jobless claims fell to a 57-year low, and the Q1 employment cost index rose more than expected, hawkish factors for Fed policy.  Also, Thursday’s rally in the S&P 500 to a new record high reduced safe-haven demand for T-notes.

European government bond yields moved lower on Thursday.  The 10-year German bund yield fell from a 15-year high of 3.133% and finished down -7.4 bp to 3.037%.  The 10-year UK gilt yield fell from a 1-month high of 5.088% and finished down -5.9 bp to 5.012%.

Eurozone Apr CPI rose +3.0% y/y, right on expectations and the strongest pace of increase in 2.5 years.  Apr core CPI rose +2.2% y/y, right on expectations.

The Eurozone Mar unemployment rate fell -0.1 and matched a record low of 6.2%, right on expectations.

Eurozone Q1 GDP rose +0.1% q/q and +0.8% y/y, weaker than expectations of +0.2% m/m and +0.9% y/y.

German Mar retail sales fell -2.0% m/m, weaker than expectations of -0.2% m/m and the biggest decline in nearly 3.5 years.

The German Apr unemployment change rose by +20,000, showing a weaker labor market than expectations of 4,300.  The Apr unemployment rate was unchanged at 6.4%, showing a weaker labor market than expectations of 6.3%

The ECB, as expected, kept the deposit facility rate unchanged at 2.00% and said, "The upside risks to inflation and the downside risks to growth have intensified."

ECB President Christine Lagarde said, "The economic growth outlook is highly uncertain and will depend on how long the war in the Middle East will last, how strongly it affects energy and other commodity markets, as well as global supply chains."  She added, "Incoming information suggests the conflict is weighing on economic activity, surveys point to slowing growth, and consumers and businesses have become less confident about the future."

Bloomberg reported that several ECB officials said they are likely to raise interest rates at their June meeting unless there are positive developments on energy prices and an end to the Iran war.

The BOE, as expected, kept its key interest rate unchanged at 3.75% in an 8-1 vote.  BOE Governor Bailey said that unchanged interest rates are "a reasonable place."

Swaps are discounting an 89% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.

US Stock Movers

Qualcomm (QCOM) closed up more than +15% to lead gainers in the Nasdaq 100 after reporting Q2 adjusted revenue of $10.60 billion, above the consensus of $10.56 billion, and saying it was “excited” by its entry into data centers, where a “leading hyperscaler custom silicon engagement is on track for initial shipments later this year.”  Other chipmakers and AI-infrastructure stocks rallied on the news, with Western Digital (WDC), Advanced Micro Devices (AMD), and Marvell Technology (MRVL) closing up more than +5%, and ARM Holdings Plc (ARM) and Texas Instruments (TXN) closing up more than +4%.  Also, Lam Research (LRCX), Applied Materials (AMAT), Analog Devices (ADI), ASML Holding NV (ASML), and Microchip Technology (MCHP) closed up more than +3%. 

Quanta Services (PWR) closed up more than +15% to lead gainers in the S&P 500 after reporting Q1 revenue of $7.87 billion, well above the consensus of $7.02 billion.

Teradyne (TER) closed up more than +12% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $400.

Caterpillar (CAT) closed up more than +9% to lead gainers in the Dow Jones Industrials after reporting Q1 adjusted EPS of $5.54, well above the consensus of $4.63.

Alphabet (GOOGL) closed up more than +9% after reporting Q1 revenue ex-TAC of $94.57 billion, above the consensus of $91.57 billion. 

Eli Lilly (LLY) closed up more than +9% after raising its full-year revenue forecast to $82 billion to $85 billion from a previous forecast of $80 billion to $83 billion.

O’Reilly Automotive (ORLY) closed up more than +7% after reporting Q1 operating income of $841.6 million, higher than the consensus of $807.9 million. 

Royal Caribbean Cruises Ltd (RCL) closed up more than +3% after reporting Q1 adjusted EPS of $3.60, stronger than the consensus of $3.21.

Wayfair (W) closed down more than -13% after reporting Q1 adjusted EPS of 26 cents, weaker than the consensus of 30 cents. 

Willis Towers Watson Plc (WTW) closed down more than -11% to lead losers in the S&P 500 after reporting Q1 revenue of $2.41 billion, below the consensus of $2.42 billion.

International Paper (IP) closed down more than -9% after reporting Q1 adjusted operating EPS of 15 cents, below the consensus of 17 cents. 

Meta Platforms (META) closed down more than -8% to lead losers in the Nasdaq 100 despite reporting better-than-expected Q1 earnings as it raised its full-year capital expenditure forecast to $125 billion to $145 billion from $115 billion to $135 billion, above the consensus of $123.11 billion. 

Nvidia (NVDA) closed down by more than -4% to lead losers in the Dow Jones Industrials after Goldman Sachs said investors should favor big spending “hyperscalers” over chipmakers. 

Microsoft (MSFT) closed down more than -3% despite reporting Q3 results that beat expectations, as analysts expressed concern about the pace of growth in the company’s Azure cloud-computing business.

Smurfit Westrock (SW) closed down more than -3% after reporting Q1 adjusted Ebitda of $1.08 billion, weaker than the consensus of $1.15 billion. 

Earnings Reports(5/1/2026)

AES Corp/The (AES), Affiliated Managers Group Inc (AMG), Aon PLC (AON), Ares Management Corp (ARES), AutoNation Inc (AN), Brookfield Renewable Corp (BEPC), Cboe Global Markets Inc (CBOE), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Colgate-Palmolive Co (CL), Dominion Energy Inc (D), Estee Lauder Cos Inc/The (EL), Exxon Mobil Corp (XOM), Federal Realty Investment Trust (FRT), Gates Industrial Corp PLC (GTES), HF Sinclair Corp (DINO), Lazard Inc (LAZ), Lear Corp (LEA), Liberty Global Ltd (LBTYA), Linde PLC (LIN), LyondellBasell Industries NV (LYB), Madison Square Garden Sports Corp (MSGS), Moderna Inc (MRNA), Newell Brands Inc (NWL), nVent Electric PLC (NVT), OneMain Holdings Inc (OMF), Summit Therapeutics Inc (SMMT), TPG Inc (TPG).