Markets Gain Momentum as Q4 Earnings Shine and Consumer Spending Surprises
The S&P 500 Index ($SPX) (SPY) closed Thursday up +0.53%. The Dow Jones Industrials Index ($DOWI) (DIA) climbed +0.38%, while the Nasdaq 100 Index ($IUXX) (QQQ) increased by +0.45%. March E-mini S&P futures (ESH25) rose by +0.49%, and March E-mini Nasdaq futures (NQH25) gained +0.50%.
Strong Earnings Reports Boost Stock Prices
On Thursday, stock indexes closed higher, with the Dow reaching an 8-week high. Positive corporate earnings reports contributed to this rise. International Business Machines soared more than +12% after predicting full-year free cash flow above expectations. Lam Research also saw a significant boost, closing up more than +7% after reporting stronger-than-anticipated Q2 revenue and a positive Q3 revenue forecast. Additionally, Thermo Fisher Scientific reported Q4 revenue surpassing expectations, leading to an increase of over +6% in its stock.
Consumer Spending Holds Strong, But Some Giants Struggle
Encouraging signals from the U.S. economy gave investors more confidence. Personal consumption in Q4 grew by +4.2%, exceeding expectations of +3.2%. However, not all companies fared well. Microsoft dropped more than -6% after reporting disappointing Q2 earnings. Meanwhile, United Parcel Service faced a significant decline of over -14% due to a revenue forecast that fell short of expectations.
Trade Concerns and Mixed Economic Data Keep Investors Cautious
Despite the overall gains, stocks pulled back from highs after President Trump reiterated his plans to impose 25% tariffs on imports from Canada and Mexico, citing trade deficits and the flow of fentanyl as key concerns. Economic news on the day was mixed, with Q4 GDP rising by only +2.3%, lower than the +2.6% forecast. Conversely, the decline in December pending home sales and a drop in weekly initial unemployment claims to 207,000 added to the uncertainty.
Earnings Season in Full Swing; Apple’s Results Awaited
Earnings season continues, with a focus on Apple’s results expected after Thursday’s market close. Analysts from Bloomberg Intelligence estimate that S&P 500 earnings grew by +7.5% year-on-year in Q4, marking one of the highest pre-season forecasts in three years.
Global Markets Reflect Optimistic Sentiments
Globally, stock markets ended higher. The Euro Stoxx 50 index reached a 24-year high with a +0.99% increase. In contrast, China’s Shanghai Composite Index remained closed for the Lunar New Year. Japan’s Nikkei Stock 225 gained +0.25%.
Interest Rate Movements and Economic Outlook
In bond markets, March 10-year T-notes (ZNH25) closed up +9 ticks, with the yield falling by -1.4 basis points to 4.514%. The 10-year T-note yield dropped to a 6-week low as falling inflation expectations supported T-note prices. The overall economic landscape was mixed following the Q4 GDP figures.
European government bond yields also decreased, with the 10-year German bund yield falling to 2.519%. The European Central Bank (ECB) cut the deposit facility rate by -25 basis points to 2.75%, cautioning that while labor market conditions remain strong, it remains “premature” to discuss future interest rate cuts.
Key U.S. Stock Movements
International Business Machines (IBM) led gains in the S&P 500 and Dow Jones, closing up over +12% after forecasting free cash flow above consensus at $13.5 billion. Las Vegas Sands (LVS) also rose more than +11% after reporting Q4 net revenue of $2.90 billion.
Lam Research (LRCX) had a strong performance, closing up more than +7%, while Thermo Fisher Scientific (TMO) saw a growth of more than +6%. Other notable gainers included PulteGroup (PHM) and Tesla (TSLA), which rose over +2% as it announced plans for robotaxi operations.
On the other side of the spectrum, Microsoft (MSFT) led losses, closing down more than -6% due to disappointing cloud revenue. United Parcel Service (UPS) faced a major slide, closing down more than -14% after a grim revenue forecast.
Upcoming Earnings Reports
The following companies are scheduled to report their earnings on January 31, 2025: AbbVie Inc (ABBV), Aon PLC (AON), Broadridge Financial Solutions (BR), Charter Communications Inc (CHTR), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Colgate-Palmolive Co (CL), Crown Castle Inc (CCI), Eaton Corp PLC (ETN), Exxon Mobil Corp (XOM), Franklin Resources Inc (BEN), LyondellBasell Industries NV (LYB), Phillips 66 (PSX), Revvity Inc (RVTY), and WW Grainger Inc (GWW).
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy
here.
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