Stocks rallied Thursday, after a strong round of corporate earnings helped reverse a selloff earlier this week.
The $S&P 500 index (.SPX.US)$ rose 2%. The$Dow Jones Industrial Average (.DJI.US)$ rose 524 points, or 1.6%, while the tech-heavy $Nasdaq Composite Index (.IXIC.US)$ gained 2.4%.
All three major indexes are on pace to close the week higher.
Facebook parent $Meta Platforms (META.US)$ led the way Thursday. The stock jumped 14% after the social network reported its first sales increase in nearly a year. That followed stronger-than-expected results earlier this week from $Microsoft (MSFT.US)$ and Google parent Alphabet $Alphabet-C (GOOG.US)$ 3.75%increase; green up pointing triangle.
The S&P communication-services sector rose 5.5%, its best one-day session since February.
Big-tech earnings have helped investors shake off mixed economic signals. New data showed U.S. growth was weaker than expected in the first quarter. On the other hand, the Federal Reserve’s preferred inflation gauge came in at an annual rate of 4.9%, which was hotter than expected.
The inflation news solidified investor expectations for another interest-rate increase when the Federal Reserve meets next week. Fed-fund futures implied a roughly 83% chance that the central bank raises interest rates by 0.25 percentage point at the meeting, up from 72% Wednesday.
Bond yields rose in response. The 10-year Treasury yield settled at 3.527%, up from 3.429% on Wednesday. The yield on the two-year also rose, to 4.097%, while the 30-year yield edged up to 3.756%. Yields rise when bond prices fall.
Mortgage rates, which tend to loosely follow the 10-year Treasury yield, hit their highest level in over a month.
Shares of toy maker Hasbro jumped 15%. Verizon Communications rallied about 5%, its biggest one-day gain since 2021. The worst-performing major stock was dental supplier Align Technology, which sank 10%.
So far this earnings season, 235 companies within the S&P 500 have reported results, according to FactSet data. Counting both actual results and analyst projections for companies yet to report, first-quarter earnings are expected to drop by 4.2%, which is less than Wall Street analysts had feared.
“You’re seeing surprises, you’re seeing beats,” said Rob Haworth, senior investment strategist at U.S. Bank Asset Management. “Not an unequivocally great story, but we’re not down as much as people were thinking.”
Reported earnings have topped expectations by 8% on average, according to Liz Young, head of investment strategy at SoFi. “That’s kind of buoyed sentiment at some level, maybe preventing the looming disaster that everyone has been waiting for,” she said.
But positive surprises may not last as the year progresses, she added: Companies are still reporting revenue growth, but profit margins are falling. “If we want inflation to come down, earnings come down with that.”
Shares of embattled lender $First Republic Bank (FRC.US)$ rose about 9%, after two days of sharp losses. The KBW Nasdaq Regional Banking Index advanced 2.1%. Earnings from European heavyweights Barclays and Deutsche Bank showed little sign of lasting damage from last month’s banking tumult.
The focus for investors will shift from the stability of regional banks to the outlook for loan growth over the coming months, Mr. Haworth said. “Certainly the expectation would be that credit continues to tighten, and part of that is because rates are up anyway.”
Asian markets rallied. The Shanghai Composite gained 0.7%. Japan’s Nikkei 225 index inched 0.1% higher.
European stocks were mixed. The Stoxx Europe 600 index advanced 0.2%, while the FTSE 100 index fell 0.3%.