Stocks Rally as Strong Tech Earnings Boost Market Sentiment

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.63%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.10%.  June E-mini S&P futures (ESM25) are up +0.64%, and June E-mini Nasdaq futures (NQM25) are up +0.99%. 

Stock indexes settle moderately higher on Thursday, 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 boosted the Magnificent Seven stocks and the overall market on Thursday.  Microsoft rose more than +7% after reporting stronger-than-expected Q3 sales and profit growth.  Meta Platforms rose more than +4% after reporting better-than-expected Q1 sales. Stocks extended their gains Thursday after US manufacturing activity fell less than expected last month.  The markets are waiting for earnings results from Amazon.com and Apple after Thursday’s close.

Market sentiment also improved Thursday after state-run China Central Television said the US had proactively reached out to China through various channels, seeking to negotiate 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.  Friday brings Apr nonfarm payrolls (expected +138,000) 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 7% 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, of the 303 companies in the S&P 500 companies that have reported quarterly results, 78% have beaten 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 on Thursday settled higher.  The Euro Stoxx 50 and China’s Shanghai Composite were 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) Thursday closed down -11.5 ticks.  The 10-year T-note yield rose +6.7 bp to 4.229%.  June T-notes fell from a 3-1/2 week high Thursday 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 on Thursday after the US Apr ISM manufacturing index fell less than expected.  Also, Thursday’s stock rally has curbed safe-haven demand for T-notes.

T-notes initially moved higher Thursday on carryover support from a rally in 10-year UK gilts to a 3-1/2 week high.  Also, Thursday’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 on Thursday moved 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 finished up +4.0 bp to 4.481%.

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) closed up more than +7% to lead gainers in the Dow Jones Industrials after reporting Q3 revenue of $70.07 billion, stronger than the consensus of $68.48 billion. 

Meta Platforms (META) closed up more than +5% after reporting Q1 sales of $42.3 billion, better than the consensus of $41.4 billion. 

Carrier Global (CARR) closed up more than +11% to lead gainers in the S&P 500 after reporting Q1 sales of $5.20 billion, better than the consensus of $5.19 billion, and raised its full-year sales estimate to $23.0 billion from a previous estimate of $22.5 billion to $23.0 billion, stronger than the consensus of $22.67 billion.

Quanta Services (PWR) closed up more than +9% 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% to lead gainers in the Nasdaq 100after 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) closed up more than +6% to lead AI-infrastructure stocks higher after Meta Platforms reported increased AI spending.  Also, Applied Digital (APLD) closed up more than +15%,  Vertiv Holdings (VRT) closed up more than +9%, and Dell Technologies (DELL) closed up more than +1%. 

CVS Health (CVS) closed up more than +4% 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. 

Wayfair (W) closed up more than +4% after reporting Q1 net revenue of $2.73 billion, better than the consensus of $2.71 billion. 

Align Technology (ALGN) closed up more than +3% after reporting Q1 net revenue of $979.3 million, above the consensus of $976.4 million. 

Beckton Dickinson & Co (BDX) closed down more than -18% 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) closed 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) closed down more than -11% 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) closed down more than -7% after reporting Q1 net sales of $1.47 billion, weaker than the consensus of $1.51 billion. 

Confluent (CFLT) closed down more than -19% after forecasting Q2 subscription revenue of $267 million to $268 million, weaker than the consensus of $269 million. 

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

Fortiv Corp (FTV) closed down more than -3% 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 (5/2/2025)

AES Corp/The (AES), Apollo Global Management Inc (APO), Cboe Global Markets Inc (CBOE), Chevron Corp (CVX), Cigna Group/The (CI), DaVita Inc (DVA), DuPont de Nemours Inc (DD), Eaton Corp PLC (ETN), Exxon Mobil Corp (XOM), Franklin Resources Inc (BEN), Monster Beverage Corp (MNST), T Rowe Price Group Inc (TROW).