US stocks rallied to their highest level in more than six weeks on Thursday as investors digest second-quarter GDP data along with a spate of corporate earnings reports and the Federal Reserve’s latest rate hike.
How stocks are traded
The Dow Jones Industrial Average DJIA, +1.02% rose 213 points, or 0.6%, to 32,412.
The S&P 500 Index SPX, +1.07%, rose 24 points, or 0.6%, to 4,049.
The Nasdaq Composite COMP was up +0.75%, up 57 points, or 0.5%, to 12,090.
On Wednesday, the Dow Jones Industrial Average was up 436 points, or 1.37%, to 32,198, the S&P 500 was up 103 points, or 2.62%, to 4,024, and the Nasdaq Composite was up 470 points, or 4.06%, to 12,032 Nasdaq the best one-day percentage gain since April 6, 2020. Stocks rebounded strongly following the Fed’s latest rate hike and comments from Federal Reserve Chair Jerome Powell.
What moves the markets
Stocks oscillated between modest losses and gains on Thursday after the release of second-quarter GDP data that showed the US economy shrank 0.9% between early April and late June. The data marked a second straight quarter of contraction after falling 1.6% in the first quarter of 2022. Stocks have recently hailed signs of a slowing economy with gains as investors bet weak data could pressure the Fed to slow the pace of interest rate hikes.
While economists polled by the Wall Street Journal had forecast growth of 0.3%, the Federal Reserve Bank of Atlanta was forecasting a 1.2% contraction, according to an update released on Wednesday.
See: The US economy shrinks in the second quarter, the GDP shows and invites talks of a recession
But Hugh Gimber, global market strategist at JPMorgan Asset Management, told MarketWatch in comments via email that markets are likely unfazed by the data because the readings don’t really tell us anything new about the state of the US economy.
“When is a recession not a recession? The box was ticked for two quarters of negative GDP growth, and yet the US economy added 2.7 million jobs over the same period. While we may have to wait several months for the National Bureau of Economic Research’s ruling, it has been clear for some time that the US economy is losing momentum,” Gimber said.
Weekly initial jobless claims fell 5,000 to 256,000 in the week ended July 23, according to the latest weekly reading of the number of Americans filing for unemployment benefits. However, the four-week moving average of new claims has risen for the eighth consecutive week.
That the market is turning higher doesn’t mean the stocks’ optimism will necessarily last, some analysts have said. Mohannad Aama, a portfolio manager at Beam Capital, said the recent market rebound appears to have been driven by a misreading of statements by Federal Reserve Chair Jerome Powell.
“Yesterday was an overreaction and misinterpretation of what Jerome Powell was trying to communicate. The lack of forward guidance doesn’t mean we’re nearing an inflection point, it just means there’s more uncertainty ahead,” Aama said.
The rise in stocks, which began on Wednesday, was fueled in part by Powell, who said interest rates are now in neutral territory and the pace of rate hikes could be slowing, although he predicted another 75 basis point hike in September thought possible.
See: Was Powell of the Fed dovish or not? 4 key takeaways from Wednesday’s press conference
Corporate earnings were also a key driver of markets this week, which is expected to be the busiest week with such reports for the entire quarter. Meta Platforms META, -6.70%, the parent company of Facebook and Instagram, released its earnings report late Wednesday that showed worse-than-expected earnings and sales, resulting in sales that came in below estimates for the current quarter.
See: Facebook revenue falls for the first time and Meta’s downfall is expected to get even worse
Looking ahead, earnings from Apple AAPL, Amazon AMZN and Mastercard MA are due after the market close on Thursday.
Nearly 49% of S&P 500 companies have reported earnings through Thursday’s open. 71.5% of those companies beat estimates, FactSet data shows.
company in focus
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Ford Motor Company
Shares of F, +5.00% rose 4% after the automaker reported a more than 50% increase in total sales in the second quarter. shares of Stanley Black & Decker Inc.
SWK, -14.31%, slipped 12.1% after the toolmaker’s second-quarter earnings fell well short of estimates.-
Pfizer Inc.
PFE, +0.84% Shares fell 1.1% even after the pharma giant reported big gains in profit and revenue in the second quarter, mostly driven by sales of its COVID drugs.
Other Markets
West Texas Intermediate Crude for September Delivery CL.1, -0.53% CLU22, -0.53% fell 0.7% to $96.55.
Gold GC00, +1.77% GCQ22, +1.77% for October delivery gained $27.70 or 1.6% to trade at $1,736.90 an ounce.
The ICE US Dollar Index rose 0.1% as the Japanese yen weakened after the Bank of Japan’s last meeting.
Bitcoin BTCUSD, +4.73% and Ethereum prices ETHUSD, +7.86% were higher on Thursday, with Bitcoin trading north of $23,000 and Ethereum above $1,600.