US stocks rose to their highest level in more than six weeks on Thursday as investors digested second-quarter GDP data, as well as a flurry of corporate earnings reports and the latest rate hike of interest from the Federal Reserve.
How stocks trade
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The Dow Jones Industrial Average DJIA, +1.11% gained 213 points, or 0.6%, to 32,412.
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The S&P 500 index SPX, +1.18% rose 24 points, or 0.6%, to 4,049.
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The Nasdaq Composite COMP, +0.94% gained 57 points, or 0.5%, to 12,090.
On Wednesday, the Dow Jones Industrial Average rose 436 points, or 1.37%, to 32,198, the S&P 500 rose 103 points, or 2.62%, to 4,024, and the Nasdaq Composite gained 470 points, or 4.06%, to 12032. Nasdaq, it was the best one-day percentage gain since April 6, 2020. Stocks rallied sharply after the Fed’s latest rate hike and comments from Federal Reserve Chairman Jerome Powell.
What is driving the markets
Stocks ranged between losses and modest gains on Thursday after the release of second-quarter GDP data that showed the US economy contracted 0.9% between the start and end of April of June The data marked a second straight quarter of contraction after printing less than 1.6% in the first quarter of 2022. Stocks have recently received signs of a slowing economy with earnings as investors are betting that the weak data could pressure the Fed to slow the pace of the rate. excursions
While economists polled by the Wall Street Journal had forecast growth of 0.3%, the Federal Reserve Bank of Atlanta had forecast a contraction of 1.2%, according to an update it published on Wednesday.
See: US economy contracts in second quarter, GDP shows invite recession talk
But Hugh Gimber, global market strategist at JPMorgan Asset Management, told MarketWatch in emailed comments that markets were likely unfazed by the data because the reading tells us nothing new about the state of the American economy.
“When is a recession not a recession? The box has been checked 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 judgment, it has long been clear that the US economy is losing momentum,” Gimber said.
Initial weekly jobless claims fell by 5,000 to 256,000 in the week ended July 23, according to the latest weekly reading on the number of Americans filing for jobless benefits. However, the four-week average of new claims increased for eight consecutive weeks.
According to some analysts, the market’s upward turn does not mean that the bullish take on stocks will necessarily remain. Mohannad Aama, portfolio manager at Beam Capital, said the latest rally in markets appears to be driven by a misinterpretation of comments by Federal Reserve Chairman Jerome Powell.
“Yesterday was an overreaction and a misreading of what Jerome Powell was trying to communicate. The lack of forward guidance doesn’t mean we’re close to a pivot, it just means there’s more uncertainty ahead.” Aama said.
The rally in stocks that began on Wednesday has been fueled in part because Powell said that interest rates are now in the range of neutral territory and that the pace of hikes may slow, although he left another hike of 75 basis points in September as a possibility.
See: Was the Fed’s Powell dovish or not? 4 key points from Wednesday’s press conference
Corporate earnings have also been a major driver of markets this week, which is expected to be the busiest week of such reports all quarter. Meta Platforms META, -6.20% , the parent company of Facebook and Instagram, released its quarterly report late Wednesday, showing worse-than-expected profit and sales and guiding for revenue below estimates for the current quarter.
See: Facebook revenue declines for first time, and Meta’s decline is expected to worsen
Looking ahead, gains were led by Apple AAPL, Amazon AMZN and Mastercard MA after Thursday’s market close.
Nearly 49% of S&P 500 companies have reported earnings through Thursday’s open. Of those companies, 71.5% beat estimates, FactSet data show.
Companies in focus
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Shares of Ford Motor Company F, +5.42% rose 4% after the automaker reported a more than 50% increase in total sales in the second quarter.
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Shares of Stanley Black & Decker Inc. SWK, -13.74% fell 12.1% after the toolmaker’s second-quarter earnings fell well short of estimates.
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Shares of Pfizer Inc. PFE, +1.00% fell 1.1% even after the pharmaceutical giant reported strong second-quarter profit and revenue driven primarily by sales of its COVID drugs.
Other markets
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West Texas Intermediate crude for September delivery CL.1, -0.67% CLU22, -0.67% fell 0.7% to $96.55.
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Gold GC00, +1.76% GCQ22, +1.76% for October delivery gained $27.70, or 1.6%, to trade at $1,736.90 an ounce.
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The ICE US dollar index rose 0.1% as the Japanese yen weakened after the Bank of Japan’s latest meeting.
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Bitcoin BTCUSD, +5.10% and ethereum ETHUSD, +7.77% prices rose Thursday, with bitcoin trading north of $23,000 and ethereum above $1,600.