[New York Stock Market] Meta Soars 14%, Rally Follows... Nasdaq Up 2.43%

by Cho Seulkina

Published 28 Apr.2023 05:21(KST)

The three major indices of the U.S. New York stock market all closed higher on the 27th (local time) despite sluggish economic growth indicators, supported by the earnings of major companies including Meta Platforms. In particular, Meta's stock price surged by double digits, leading the overall market rally. First Republic Bank, which had recently seen a sharp decline in its stock price, also rebounded on the day, somewhat easing concerns about a banking sector crisis.

At the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average closed at 33,826.16, up 524.29 points (1.57%) from the previous session. The large-cap focused S&P 500 index rose 79.36 points (1.96%) to 4,135.35, and the tech-heavy Nasdaq index gained 287.89 points (2.43%) to close at 12,142.24. The Dow and S&P indices reached their highest levels since January, while the Nasdaq hit its highest since March.

All 11 sectors in the S&P 500 recorded gains. Communication stocks surged more than 5%. Real estate, consumer discretionary, and technology stocks also rose by over 2%. Meta Platforms, which released earnings and guidance exceeding market expectations after the previous day's close, closed up 13.93%. Microsoft (MS) and Google Alphabet, which reported strong earnings a day earlier, also jumped more than 3% each. Amazon and Tesla, which announced earnings after the market close on the same day, rose over 4%. First Republic, which recently highlighted a roughly 41% drop in first-quarter deposits and reignited concerns about the banking sector following the Silicon Valley Bank (SVB) crisis, rose nearly 9%.

[Image source=Reuters Yonhap News]

Investors closely monitored the flood of major corporate earnings and economic indicators this week. Meta Platforms announced after the previous day's close that its first-quarter earnings per share were $2.20, surpassing market expectations of $2.02. Its second-quarter earnings guidance also exceeded Wall Street forecasts, projecting $29.5 billion to $32 billion. Consequently, Goldman Sachs, JP Morgan Chase, Citigroup, and others all raised their price targets for Meta Platforms. Honeywell, Harley-Davidson, Comcast, and Hershey also reported better-than-expected earnings. On the other hand, Southwest Airlines recorded larger-than-expected losses due to massive flight cancellations caused by winter storms since the end of last year.

Quincy Crosby, Chief Global Strategist at LPL Financial, said, "The market was holding its breath for Big Tech," and assessed that "overall, it was not disappointing." However, Liz Young, Chief Investment Officer at SoFi, warned that although most S&P 500 companies are reporting higher-than-expected earnings, the worst is not yet over. She noted, "We have already seen forecasts lowered by about 15%. Psychologically, this might be good, but companies are just beating rather unimpressive numbers." Amazon and Intel are scheduled to release earnings after the market close on the day.

U.S. first-quarter growth, released before the market opened, fell significantly short of expectations. The U.S. Department of Commerce reported that the preliminary estimate of first-quarter GDP growth was 1.1% annualized, well below the market forecast of 2.0%, and down from the previous quarter's 2.6%. Investment in the private and real estate sectors, which are sensitive to interest rates, was confirmed to have dragged down growth. This has led to interpretations that the Federal Reserve's aggressive rate hikes over the past year are impacting the real economy. Currently, many economists predict that the U.S. will inevitably face a recession by the end of the year. The Wall Street Journal (WSJ) warned that tighter lending standards for households and businesses following the SVB crisis could lead to credit tightening. Economic media CNBC noted that the first-quarter growth data confirmed high inflation and slowing growth, raising concerns about a possible return of 1970s-style stagflation.

Announcements of layoffs and restructuring by companies also continued. GAP, a large fashion company that has been posting losses, announced it would lay off 1,800 employees. Ride-sharing service Lyft, which cut 700 jobs last November, said it would expand layoffs to over 1,000 employees, representing 26% of its workforce. Cloud service company Dropbox also announced layoffs of 500 employees, about 16% of its global workforce.

On the other hand, the unemployment data released on the day confirmed that the U.S. labor market remains overheated despite ongoing corporate restructuring. According to the U.S. Department of Labor, new claims for unemployment benefits for the week of April 16-22 fell by 16,000 to 230,000. Continued claims for unemployment benefits, which require at least two weeks of filing, also decreased by 3,000 to 1.86 million.

Ahead of the May Federal Open Market Committee (FOMC) meeting that sets the benchmark interest rate, the Fed's preferred inflation gauge, the March Personal Consumption Expenditures (PCE) price index, will be released on the 28th. Wall Street experts expect the core PCE to rise 4.5% year-over-year and 0.3% month-over-month.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently prices in an over 88% probability that the Fed will implement a "baby step" 0.25 percentage point rate hike in May. However, some speculate that the Fed might surprise the market by pausing rate hikes at the upcoming FOMC meeting and then raising rates in June.

In the New York bond market, U.S. Treasury yields are rising. The 10-year Treasury yield is around 3.52%, and the 2-year yield, which is sensitive to monetary policy, is near 4.08%. The Dollar Index, which measures the value of the U.S. dollar against six major currencies, stands at about 101.5, similar to the previous session.

International oil prices rebounded after three trading days amid concerns over the U.S. economic slowdown and easing banking sector fears. On the New York Mercantile Exchange, June delivery West Texas Intermediate (WTI) crude oil closed at $74.76 per barrel, up 46 cents (0.62%) from the previous session.