Market Rally Driven by Strong Earnings, Manufacturing Activity Insights

The S&P 500 Index ($SPX) (SPY) is up +1.36% today, the Dow Jones Industrials Index ($DOWI) (DIA) has risen +0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.93%. Additionally, June E-mini S&P futures (ESM25) climbed +1.51%, while June E-mini Nasdaq futures (NQM25) increased by +1.99%.

Today’s stock markets are seeing notable gains, with the S&P 500 and Dow Jones Industrials reaching four-week highs, and the Nasdaq 100 hitting a five-week high. Strong earnings from Microsoft and Meta Platforms have propelled the Magnificent Seven stocks upward, enhancing overall market performance. Microsoft shares surged more than +9% after reporting Q3 sales and profit growth that exceeded expectations. Similarly, Meta Platforms saw an increase of over +6% following its better-than-expected Q1 sales results. Market gains continued as U.S. manufacturing activity posted a smaller-than-anticipated decline last month.

Support for market sentiment has been bolstered by state-run China Central Television’s report that the U.S. is proactively engaging with China through various channels to negotiate tariff issues.

In labor market news, U.S. weekly initial unemployment claims rose by +18,000 to a two-month high of 241,000, surpassing the expected 223,000. Additionally, weekly continuing claims increased by +83,000 to a 3.5-year high of 1.916 million, reflecting a weaker labor market than expected.

The April ISM manufacturing index fell -0.3 to a five-month low of 48.7, though this was above the anticipated decline to 47.9. The prices paid sub-index rose +0.4 to a two-and-three-quarter-year high of 69.8, but still below expectations of 73.0. Additionally, March construction spending unexpectedly declined by -0.5% month-over-month, contrasting with expected growth of +0.2% and marking the largest drop in six months.

The focus for the remainder of this week will likely center around U.S. tariff negotiations and trade updates. After today’s market close, earnings results from Amazon.com and Apple are expected to influence market direction. On Friday, the release of April nonfarm payrolls (anticipated at +130,000) and the unemployment rate (expected to remain at 4.2%) will also be closely watched. Furthermore, April average hourly earnings are projected to rise by +0.3% month-over-month and +3.9% year-over-year.

Markets currently project an 8% chance for a -25 basis point rate cut following the FOMC meeting on May 6-7. The Q1 earnings reporting season is well underway. Data from Bloomberg Intelligence indicates a consensus for S&P 500 year-over-year earnings growth of +6.7%, down from earlier expectations of +11.1% in November. To date, just over one-third of S&P 500 companies have reported results, with 75% exceeding estimates. Full-year 2025 corporate profit predictions for the S&P 500 now project a rise of +9.4%, reduced from the initial forecast of +12.5% in January.

Internationally, stock markets have trended higher today. The Euro Stoxx 50 and China’s Shanghai Composite are closed for the Labor Day holiday. Japan’s Nikkei Stock 225 reached a one-month high, closing up +1.13%.

Interest Rates

June 10-year T-notes (ZNM25) are down -5 ticks, with the yield for 10-year T-notes increasing by +3.8 basis points to 4.200%. Following a rise to a three-and-a-half-week high, June T-notes fell, and the 10-year T-note yield rebounded from a low of 4.120%. The decline in T-note prices was influenced by long liquidation after the U.S. April ISM manufacturing index showed less decline than anticipated. Additionally, the strong stock rally today has reduced safe-haven demand for T-notes.

Initially, T-notes saw a rise aided by support from a rally in 10-year UK gilts. Today’s U.S. job news, highlighting an increase in weekly jobless claims, serves as a dovish signal for Fed policy.

European government bond yields have increased today. Ten-year German bunds did not trade, as markets in Germany are closed for Labour Day. The yield for 10-year UK gilts rebounded from a three-and-a-half-week low of 4.415%, now up +1.4 basis points to 4.455%.

Swaps indicate a 100% probability for a -25 basis point rate cut by the ECB at its June 5 policy meeting.

US Stock Movers

Microsoft (MSFT) leads gainers in the Dow Jones Industrials and Nasdaq 100, rising over +9% after reporting Q3 revenue of $70.07 billion, exceeding the consensus of $68.48 billion.

Meta Platforms (META) also saw its stock rise more than +6% after reporting Q1 sales of $42.3 billion, surpassing the consensus of $41.4 billion.

Quanta Services (PWR) climbed by more than +10% after reporting Q1 EPS of 96 cents, exceeding expectations of 79 cents, and raising its full-year adjusted EPS estimate to a range of $10.05-$10.65 from the previous $9.90-$10.50.

IDEXX Laboratories (IDXX) is up over +8% after reporting Q1 EPS of $2.96, above the consensus estimate of $2.81, and raising its full-year EPS forecast to $11.93-$12.43 from a prior estimate of $11.74-$12.24.

Arista Networks (ANET) increased more than +7%, benefiting from increased AI spending reported by Meta Platforms. Also, Vertiv Holdings (VRT), Dell Technologies (DELL), and Applied Digital (APLD) are all up more than +2%.

CVS Health (CVS) has risen more than +7% following the announcement of Q1 adjusted EPS of $2.25, significantly above the consensus of $1.69. The company raised its full-year adjusted EPS forecast to $6.00-$6.20, surpassing the consensus of $5.91.

Align Technology (ALGN) is up over +6% after reporting Q1 net revenue of $979.3 million, exceeding expectations of $976.4 million.

Wayfair (W) gained more than +3% after reporting Q1 net revenue of $2.73 billion, better than the consensus of $2.71 billion.

On the downside, Beckton Dickinson & Co (BDX) has fallen more than -11% after cutting its full-year adjusted EPS forecast to $14.06-$14.34, below the consensus of $14.43.

Qualcomm (QCOM) is down more than -8% after forecasting Q3 revenue between $9.9 billion and $10.7 billion, with the midpoint falling below the consensus of $10.33 billion.

Eli Lilly (LLY) has seen a decrease of more than -7% after reducing its full-year adjusted EPS to a range of $20.78 to $22.28 from a prior estimate of $22.50 to $24.00.

Church & Dwight (CHD) is down more than -6% after reporting Q1 net sales of $1.47 billion, which fell short of the consensus of $1.51 billion.

Confluent (CFLT) has dropped more than -15%, forecasting Q2 subscription revenue of $267 million to $268 million, below the consensus of $269 million.

Broadridge Financial Services (BR) is down over -5% after reporting Q3 revenue of $1.81 billion, which missed the consensus estimate of $1.86 billion.

Fortiv Corp (FTV) has declined more than -4% after revising its full-year adjusted EPS forecast to a range of $3.80-$4.00, down from the previous forecast of $4.00-$4.12.