Stocks Rally on Solid Tech Earnings

The S&P 500 Index ($SPX) (SPY) today is up +1.36%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.93%.  June E-mini S&P futures (ESM25) are up +1.51%, and June E-mini Nasdaq futures (NQM25) are up +1.99%. 

Stock indexes today are sharply higher, with the S&P 500 and Dow Jones Industrials posting 4-week highs and the Nasdaq 100 posting a 5-week high. Positive earnings results from Microsoft and Meta Platforms are leading the Magnificent Seven stocks higher and boosting the overall market today.  Microsoft is up more than +9% after reporting stronger-than-expected Q3 sales and profit growth.  Meta Platforms is up more than +6% after reporting better-than-expected Q1 sales. Stocks extended their gains today after US manufacturing activity fell less than expected last month. 

Market sentiment is also seeing support today after state-run China Central Television said the US has been proactively reaching out to China through various channels, seeking to negotiate on tariff issues.

US weekly initial unemployment claims rose +18,000 to a 2-month high of 241,000, showing a weaker labor market than expectations of 223,000. Also, weekly continuing claims rose +83,000 to a 3-1/2 year high of 1.916 million, showing a weaker labor market than expectations of 1.865 million.

The US Apr ISM manufacturing index fell -0.3 to a 5-month low of 48.7, although that was stronger than expectations of a larger decline to 47.9.  The Apr ISM prices paid sub-index rose +0.4 to a 2-3/4 year high of 69.8, although that was below expectations of 73.0.

US Mar construction spending unexpectedly fell -0.5% m/m, weaker than expectations of a +0.2% m/m increase and the largest decline in 6 months.

Market attention for the rest of this week will focus on news of US tariffs and trade negotiations.  Also, earnings results from Amazon.com and Apple will be released after today’s close. Friday brings Apr nonfarm payrolls (expected +130,000) and the Apr unemployment rate (expected unchanged at 4.2%). Also, Apr average hourly earnings are expected to climb +0.3% m/m and +3.9% y/y.   

The markets are discounting the chances at 8% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Q1 earnings reporting season is in full swing.  According to data compiled by Bloomberg Intelligence, the market consensus is for Q1 year-over-year earnings growth of +6.7% for the S&P 500 stocks, down from expectations of +11.1% in early November.  So far, just over a third of S&P 500 companies have reported quarterly results, with 75% beating estimates.  Full-year 2025 corporate profits for the S&P 500 are seen rising +9.4%, down from the forecast of +12.5% in early January.  

Overseas stock markets today are higher.  The Euro Stoxx 50 and China’s Shanghai Composite are closed for the Labor Day holiday.  Japan’s Nikkei Stock 225 rallied to a 1-month high and closed up +1.13%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -5 ticks.  The 10-year T-note yield is up +3.8 bp to 4.200%.  June T-notes today fell from a 3-1/2 week high and turned lower, and the 10-year T-note yield rebounded from a 3-1/2 week low of 4.120% and moved higher.  Long liquidation pressures knocked T-note prices lower today after the US Apr ISM manufacturing index fell less than expected.  Also, today’s stock rally has curbed safe-haven demand for T-notes.

T-notes today initially moved higher on carryover support from a rally in 10-year UK gilts to a 3-1/2 week high.  Also, today’s US news that showed weekly jobless claims rose to a 2-month high is a dovish factor for Fed policy.

European government bond yields today are higher.  10-year German bunds did not trade today, with markets in Germany closed for the Labour Day holiday.  The 10-year UK gilt yield rebounded from a 3-1/2 week low of 4.415% and is up +1.4 bp to 4.455%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Microsoft (MSFT) is up more than +9% to lead gainers in the Dow Jones Industrials and the Nasdaq 100 after reporting Q3 revenue of $70.07 billion, stronger than the consensus of $68.48 billion. 

Meta Platforms (META) is up more than +6% after reporting Q1 sales of $42.3 billion, better than the consensus of $41.4 billion. 

Quanta Services (PWR) is up more than +10% to lead gainers in the S&P 500 after reporting Q1 EPS of 96 cents, above the consensus of 79 cents and boosted its full-year adjusted EPS estimate to $10.05-$10.65 from a previous estimate of $9.90-$10.50.

IDEXX Laboratories (IDXX) is up more than +8% after reporting Q1 EPS of $2.96, better than the consensus of $2.81, and raised its full-year EPS forecast to $11.93-$12.43 from a previous estimate of $11.74-$12.24.

Arista Networks (ANET) is up more than +7% to lead AI-infrastructure stocks higher after Meta Platforms reported increased AI spending.  Also, Vertiv Holdings (VRT), Dell Technologies (DELL), and Applied Digital (APLD) are up more than +2%. 

CVS Health (CVS) is up more than +7% after reporting Q1 adjusted EPS of $2.25, well above the consensus of $1.69, and raised its full-year adjusted EPS forecast to $6.00-$6.20 from a previous estimate of $5.75-$6.00, stronger than the consensus of $5.91. 

Align Technology (ALGN) is up more than +6% after reporting Q1 net revenue of $979.3 million, above the consensus of $976.4 million. 

Wayfair (W) is up more than +3% after reporting Q1 net revenue of $2.73 billion, better than the consensus of $2.71 billion. 

Beckton Dickinson & Co (BDX) is down more than -11% to lead losers in the S&P 500 after cutting its full-year adjusted EPS forecast to $14.06-$14.34 from a previous forecast of $14.30-$14.60, below the consensus of $14.43. 

Qualcomm (QCOM) is down more than -8% to lead losers in the Nasdaq 100 after forecasting Q3 revenue of $9.9 billion to $10.7 billion, the midpoint below the consensus of $10.33 billion. 

Eli Lilly (LLY) is down more than -7% after cutting its full-year adjusted EPS to $20.78 to $22.28 from a previous estimate of $22.50 to $24.00. 

Church & Dwight (CHD) is down more than -6% after reporting Q1 net sales of $1.47 billion, weaker than the consensus of $1.51 billion. 

Confluent (CFLT) is down more than -15% after forecasting Q2 subscription revenue of $267 million to $268 million, weaker than the consensus of $269 million. 

Broadridge Financial Services (BR) is down more than -5% after reporting Q3 revenue of $1.81 billion, weaker than the consensus of $1.86 billion.

Fortiv Corp (FTV) is down more than -4% after cutting its full-year adjusted EPS forecast to $3.80-$4.00 from a previous forecast of $4.00-$4.12, weaker than the consensus of $4.03.

Earnings Reports (5/1/2025)

Air Products and Chemicals Inc (APD), Airbnb Inc (ABNB), Amazon.com Inc (AMZN), Ameren Corp (AEE), American International Group Inc (AIG), AMETEK Inc (AME), Amgen Inc (AMGN), Apple Inc (AAPL), Aptiv PLC (APTV), Arthur J Gallagher & Co (AJG), Baxter International Inc (BAX), Becton Dickinson & Co (BDX), Biogen Inc (BIIB), Broadridge Financial Solutions (BR), Builders FirstSource Inc (BLDR), Camden Property Trust (CPT), Cardinal Health Inc (CAH), Carrier Global Corp (CARR), Church & Dwight Co Inc (CHD),

Consolidated Edison Inc (ED), CVS Health Corp (CVS), Dexcom Inc (DXCM), Dominion Energy Inc (D), DTE Energy Co (DTE), Eli Lilly & Co (LLY), EOG Resources Inc (EOG), Estee Lauder Cos Inc/The (EL), Eversource Energy (ES), Exelon Corp (EXC), Fortive Corp (FTV), GoDaddy Inc (GDDY), Hershey Co/The (HSY), Hologic Inc (HOLX), Howmet Aerospace Inc (HWM), Hubbell Inc (HUBB), Huntington Ingalls Industries (HII), IDEX Corp (IEX), IDEXX Laboratories Inc (IDXX), Ingersoll Rand Inc (IR), Intercontinental Exchange Inc (ICE), Iron Mountain Inc (IRM), Juniper Networks Inc (JNPR), Kellanova (K), Kimco Realty Corp (KIM), KKR & Co Inc (KKR), Linde PLC (LIN), Live Nation Entertainment Inc (LYV), Mastercard Inc (MA), McDonald’s Corp (MCD), Mettler-Toledo International Inc (MTD), Moderna Inc (MRNA), Mohawk Industries Inc (MHK), Monolithic Power Systems Inc (MPWR), Motorola Solutions Inc (MSI), Parker-Hannifin Corp (PH), Pinnacle West Capital Corp (PNW), Quanta Services Inc (PWR), Smurfit WestRock PLC (SW), Southern Co/The (SO), Stryker Corp (SYK), Targa Resources Corp (TRGP), WW Grainger Inc (GWW).