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Main U.S. indexes end sharply higher: Nasdaq up ~2.5%
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All S&P 500 sectors gain: comm svcs leads
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Dollar edges up; crude gains; bitcoin up ~4%; gold edges
down
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U.S. 10-Year Treasury yield jumps to ~3.52%
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U.S. STOCKS RALLY AS META FUELS BOUNCE (1605 EDT/2005
GMT)
Wall Street closed sharply higher on Thursday, with the
Dow Industrials and S&P 500 snapping two-session
losing streaks as a surge in Meta shares helped spark a
broad rally after its quarterly results.
Meta shares shot up nearly 14% for its biggest daily percentage gain since Feb. 2, after
reporting earnings
that topped expectations and gave Q2 revenue guidance that
was above estimates. The gains vaulted Meta to the top of the
S&P 500 in year-to-date performance, up 99% FOR 2023.
That sent the S&P communications services sector up 5.5% as the best performing S&P 500 group on the
session, also notching its biggest one-day percentage climb
since Feb. 2. Each of the 11 major S&P sectors were higher on
the day.
The Dow and S&P had been coming off their biggest
two-day percentage drops since early March and rebounded for
their best daily performance since Jan. 6. On the Dow, Cisco
Systems and Caterpillar were the sole
decliners.
Earnings expectations have rapidly improved in recent days, thanks in large part to results from mega caps such as Meta and Alphabet .
The recent earnings improvement coupled with
mixed economic data that showed growth slowed in the first quarter while the labor market remains tight also helped boost optimism the economy may avoid a deep recession. Investors will get another look at inflation data on Friday in the form of personal consumption expenditures for March.
Below is your closing market snapshot:
(Chuck Mikolajczak)
*****
ESTIMATED DROP IN U.S. EARNINGS CUT FURTHER (1320 EDT/1720 GMT) The estimated fall in first-quarter S&P 500 earnings was reduced further on Thursday, based on Refinitiv data, after another round of stronger-than-expected results, especially from megacaps like Meta Platforms . Analysts now expect first-quarter earnings to have fallen just 2.4% year-over-year for S&P 500 companies. That's a big improvement even from Wednesday's estimate, which was for a decline of 3.2%. Analysts had forecast a 5.1% fall in earnings for the quarter at the start of April. Among other heavily weighted names that reported upbeat results this week were Microsoft and Alphabet . Meta's shares were up about 15% on Thursday, giving the S&P 500 its biggest boost, followed by Microsoft, Apple and Amazon.com . Amazon.com is due to report after the closing bell, while Apple's results are due next week. In aggregate, companies are reporting earnings 7.8% above expectations compared with a 4.2% average for the prior four reporting periods, according to Refinitiv.
(Caroline Valetkevitch)
*****
FED TO DELIVER 25BPS, BUT THEN THIS MIGHT SIGNAL A PAUSE
-MORGAN STANLEY (1215 EDT/1615 GMT)
Ahead of next week's much anticipated FOMC meeting, Morgan
Stanley (MS) is out with their views on what to expect.
As the MS U.S. economics and strategy team, including chief
U.S. economist Ellen Zentner, sees it, the Fed will deliver a
25bp rate hike bringing the peak rate for this tightening cycle
to 5.1%.
MS says that banking conditions are stable, though they
admit the impact of tighter credit conditions remains uncertain.
Still, they believe a robust job market and high inflation
support the May hike thesis.
However, MS believes the May meeting "is likely to represent
a turning point in the monetary policy tightening cycle."
If the FOMC were to signal a pause, MS would expect that
they would replace in the statement "some additional policy
firming" with "the timing and size of future adjustments" will
depend on incoming information.
That said, the FOMC would likely stick with their "rates
will likely need to remain high for a considerable period of
time" mantra in order to get inflation back to its target.
In any event, with scope for markets to adopt a dovish take
on the Fed with this meeting, especially since banking stress
has recently resurfaced, MS recommends 2s30s and 5s30s
steepeners with stops at -50bps and -15bps, long 5y USTs with a
stop at 3.75%, and long 10y breakevens with long 2y USTs.
As for FX, MS recommends long USD positioning to hedge
against tail risks.
Meanwhile, according to the CME's FedWatch Tool there is an
85% chance of 25bp rate increase next week. There is a 15%
chance that the Fed sits on its hands. I
(Terence Gabriel)
*****
SAME SONG, HUNDREDTH VERSE: GDP, JOBLESS CLAIMS, PENDING
HOME SALES (1140 EDT/1540 GMT)
A data triple play on Thursday told a story market
participants have learned by heart - the economy is slowing, and
the only thing tighter than the labor market is housing
inventories.
The U.S. economy expanded at a quarterly annualized rate of
1.1% in the first three months of the year, according to the
Commerce Department's initial stab at first-quarter GDP .
The print fell well shy of the 2% consensus and mark a sharp
deceleration from the 2.6% prior quarter growth.
Beneath the headline, private inventories was the villain,
subtracting a net 2.3 percentage points from the topline number.
And core price growth surged past expectations, heating up
by half a percentage point to 4.9%.
"This morning’s data was the worst of both worlds, with
growth down and inflation up," writes Chris Zaccarelli, Chief
Investment Officer for Independent Advisor Alliance. "The Fed
clearly needs to keep raising rates (because of inflation) and
they are going to be raising rates right into a slowdown."
As per usual, the consumer did most of the heavy lifting,
boasting a 3.7% growth and contributing 2.5 percentage points to
the upside, including a 16.9% surge in expenditures on durable
goods, with autos providing much of the horsepower.
But how long will that last?
"Consumers started the year on strong footing as spending on
both goods and services added to headline growth in the first
quarter," says Jeffrey Roach, Chief Economist for LPL Financial.
"But higher frequency data tell us that consumers have started
to slip."
Next, the number of U.S. workers filing first-time
applications for unemployment benefits fell by 6.5%
last week to 230,000, according to the Labor Department.
While layoff announcements have been surging since November,
particularly from the headline-grabbers from the tech sector,
they have yet to have any meaningful impact on the data.
In normal times, a shorter line outside the unemployment
office would be good news, but the recent downtick in initial
claims - the four-week moving average, which irons out weekly
volatility, also edged lower - is not what the Federal Reserve
wants to see.
Labor market tightness pushes wages higher, which is a major
driver of the "i" word.
Even so, initial claims have remained above the 200,000
since late January, a level considered to be the low end of a
range associated with healthy labor market churn, so there's
that.
"The slow march upwards of initial claims since the
beginning of the year offered some evidence that labor demand is
moderating," says Matthew Martin, U.S. economist at Oxford
Economics. "In recent weeks, however, the level of jobless
claims has flattened out, reminding us that labor markets are
still tight and workers who are losing their jobs are finding it
relatively easy to find work."
Ongoing claims , reported on a one-week lag,
inched 0.3% lower to 1.86 million, still hovering above the
pre-pandemic 1.7 million level.
Finally, signed contracts for the pending sales of pre-owned
U.S. homes fell by 5.2% last month, plunging past
the shallower 0.5% drop analysts expected.
The report, courtesy of the National Association of
Realtors, is considered among the more forward looking housing
indicators, as signed contracts generally translate into sales a
month or two down the road.
"The lack of housing inventory is a major constraint to
rising sales," says Lawrence Yun, NAR's chief economist.
"Multiple offers are still occurring on about a third of all
listings, and 28% of homes are selling above list price. Limited
housing supply is simply not meeting demand nationally."
This jibes well with Tuesday's New Home Sales report, which
showed sales of freshly constructed homes surging 9.6% in March
to a one-year high.
(Stephen Culp)
*****
META LEADS STABILIZING ATTEMPT (1005 EDT/1405 GMT) U.S. stocks are solidly higher in the early stages of trading, as the S&P 500 tries to stabilize after suffering its biggest two-day percentage decline since early March that left the index at its lowest closing level since March 30.
Meta Platforms is leading the charge higher, surging about 14% after its quarterly results that put the stock on track for its biggest daily percentage jump since Feb. 2, and helping to lift the communication services sector more than 4%. The surge puts Meta up about 99% on the year, catapulting it past Nvidia , and its roughly 83% gain for 2023, as the best performing S&P 500 component.
Economic data was mixed, as a reading of economic growth slowed more than anticipated in the first quarter, raising hope the Federal Reserve may be nearing its tightening cycle, but weekly initial jobless claims were less than expected, indicating the labor market remains tight.
In addition, pending home sales tumbled 5.2% in March, well short of the expectation calling for a 0.5% rise and ending a three-month bounce.
The Dow Transportation Average , after its biggest two-day percentage decline in nearly a year, is also bouncing, as CH Robinson jumps more than 6% after its earnings.
Below is your market snapshot:
(Chuck Mikolajczak)
*****
S&P 500 INDEX: THROWN FOR A LOSS (0900 EDT/1300 GMT) The S&P 500 index , which is down 2% since Monday, just suffered its biggest two-day drop since March 9-10. However, in the wake of Meta Platforms bullish revenue forecast, and a below estimates advance Q1 GDP reading fanning slowdown fears, e-mini S&P 500 futures are suggesting an SPX rise of about 0.6%, or 20 points or so, at the open. Thus, the benchmark index appears poised to attempt to get back on its horse:
The S&P 500 ended at 4,055.99 on Wednesday, while flirting with support levels. The broken resistance line from the January 2022 record high should be around 4,064 on Thursday. After closing above this line on March 31, the SPX returned to test it as support. The SPX posted one minor daily close back below it on April 5 before quickly reclaiming the line, and then pushing to fresh highs. Traders will now be looking to see if a similar pattern repeats after Wednesday's one-day minor break. Given the premarket futures gains, the SPX looks poised to quickly reclaim the line early in the session. If it is successful on a closing basis, it can potentially refocus on major resistance in the 4,155-4,203 area. Meanwhile, the closely watched 50, 100, and 200-day moving averages, which ended Wednesday around 4,033-4,002-3,961, are packed in a relatively tight zone.
(Terence Gabriel)
*****
FOR THURSDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
