Stocks Surge on Strong Earnings Results from Megacap Tech Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Thursday closed up +2.47%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.85%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +3.48%.

U.S. stock indexes Thursday closed sharply higher.  Strong quarterly earnings results from tech megacap stocks Thursday propelled the overall market higher.  Meta Platforms surged more than +17%, and PayPal Holdings jumped more than +11% after reporting better than expected earnings results.  Also, chip stocks rallied Thursday after Qualcomm reported better than expected quarterly earnings.  Q1 earnings season has gotten off to a strong start and is bullish for stocks as 76% of the 140 S&P 500 companies that have reported have beaten earnings estimates, and 65% of those reported have raised guidance for the full year. 

Higher T-note yields today are negative for stocks as inflation concerns weighed on German bund prices and undercut T-notes after German consumer prices in April rose more than expected at a record pace.  Another bearish factor for stocks is U.S. growth concerns after Thursday’s data showed U.S. Q1 GDP unexpectedly contracted.

U.S. weekly initial unemployment claims fell -5,000 to 180,000, right on expectations.

U.S. Q1 GDP unexpectedly contracted -1.4% (q/q annualized), weaker than expectations of +1.0%.  The Q1 core PCE deflator rose +5.2% q/q, a slower pace of increase than expectations of +5.5% q/q.

Today’s stock movers…

Meta Platforms (FB) closed up more than +17% Thursday to lead gainers in the S&P 500 and Nasdaq 100 after it reported Q1 EPS of $2.72, above the consensus of $2.56 billion. 

Thursday's rally in chip stocks led gains in technology stocks and boosted the overall market.  Qualcomm (QCOM) closed up more than +9% after it reported Q2 adjusted revenue of $11.61 billion, stronger than the consensus of $10.60 billion, and forecast Q3 revenue of $10.5 billion to $11.3 billion, better than the consensus of $9.07 billion. Other chip stocks also rallied Thursday, with Nvidia (NVDA) and Marvell Technology (MRVL) closing up more than +7%.  In addition, ASML Holding NV (ASML), Micron Technology (MU), Applied Materials (AMAT), Lam Research (LRCX), and Advanced Micro Devices (AMD) closed up by more than +6%.

PayPal Holdings (PYPL) closed up more than +11% Thursday after reporting Q1 net revenue of $6.48 billion, stronger than the consensus of $6.40 billion, and Q1 active customer accounts of 429 million, above the consensus of 427.3 million. 

PTC Inc (PTC) closed up more than +17% Thursday after reporting Q2 revenue of $505 million, stronger than the consensus of $483,4 million.

Discover Financial Services (DFS) closed up more than +8% Thursday after reporting Q1 EPS of $4.22, well above the consensus of $3.63.

Merck & Co. (MRK) closed up more than +5% Thursday after reporting Q1 adjusted EPS of $2,14, stronger than the consensus of $1,83, and raising guidance on full-year adjusted EPS to $7.24-$7.36 from a prior forecast of $7.12-$7.27.

Align Technology (ALGN) closed down more than -15% Thursday to lead losers in the S&P 500 and Nasdaq 100 after reporting Q1 net revenue of $973.2 million, below the consensus of $999.5 million.

O’Reilly Automotive (ORLY) closed down more than -12% Thursday after reporting Q1 sales of $3.30 billion, below the consensus of $3.32 billion.

Amgen (AMGN) closed down more than -4% Thursday to lead losers in the Dow Jones Industrials after it said it faced a $7.1 billion fine from the IRS related to how the company reported profits from the years 2013 to 2015.

Comcast (CMCSA) closed down more than -6% Thursday after it reported that it lost -512,000 cable-TV subscribers in Q1, more than expectations of -439,599. 

Across the markets…

June 10-year T-notes (ZNM22) on Thursday closed down by -14 ticks, and the 10-year T-note yield rose +1.9 bp to 2.851%.  A surge in German Apr CPI to a record high +7.8% y/y undercut 10-year German bunds and T-note prices Thursday.  Also, strong corporate earnings results pushed U.S. stocks sharply higher Thursday and reduced the safe-haven demand for T-notes.  In addition, a more than +3% rally in crude oil prices Thursday boosted inflation expectations and undercut T-note prices.