Tech Earnings Push Inflation Concerns to the Back Burner – For Now

by Sequoia Financial Group
by Sequoia Financial Group

Coming off a week in which the S&P 500 declined every day, market participants were desperate for good news. And, for the most part, a week packed with economic reports, Q1 earnings results from more than 30% of the S&P 500,[1] and an all-important inflation reading delivered the goods.

Truist Financial started the week on a positive note, besting earnings per share estimates. The report helped lift banking stocks, many of which also outperformed expectations for the quarter. Meanwhile, tech stocks got a lift from recently slumping Nvidia thanks to positive analyst comments. Nvidia rallied 4.4% Monday, carrying the chip sector and the overall market higher.[2]

Tuesday brought additional strong earnings reports from Spotify, UPS, and GE Aerospace. Spotify grew revenue 20% year over year, improved margins, and guided for strong second quarter numbers. The stock surged more than 10% on the day. UPS and GE Aerospace also surpassed expectations. And on the economic front, a soft manufacturing report provided a breather for the bond market,[3] which had slumped in recent weeks as expectations for Fed rate cuts fizzled.

Tesla dominated the headlines on Wednesday. Earnings weren’t great, but the company announced it would deliver more affordable vehicles on a faster timeline than expected. The stock jumped 12% on the news. Overall, the Q1 earnings season was off to a strong start, with close to 80% of reporting companies beating earnings forecasts.[4]

Meta was one of them, reporting solid earnings after the market close on Wednesday. However, guidance landed flat and the stock was punished when markets opened Thursday. Shares ended the day down more than 10%. Adding to market woes, the first reading on Q1 GDP came in weaker than expected and hinted of higher inflation, a combination which prompted stagflation fears and pushed stock and bond prices lower. The Dow Jones Industrial Average fell 375 points for the day.[5]

Thankfully markets quickly reversed course, as Microsoft and Google surprised to the upside after the   close on Thursday. And Google announced its first dividend after delivering strong revenue growth and improved margins. So, despite the PCE Price Index, the Fed’s favored inflation measure, coming in a bit hotter than expected on Friday morning, stocks rallied to end the week nicely higher. The S&P 500 posted its best weekly gain since November, and the NASDAQ jumped more than 4% for the week.[6]

Looking ahead, earnings season continues, with Apple, Eli Lilly, McDonalds, Coca Cola, Amazon, and many more due to report.










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