US Stock Indices Rise Following Strong Earnings Reports
The S&P 500 Index ($SPX) (SPY) closed up +0.63% on Thursday, while the Dow Jones Industrials Index ($DOWI) (DIA) saw a +0.21% increase. The Nasdaq 100 Index ($IUXX) (QQQ) rose by +1.10%. Furthermore, June E-mini S&P futures (ESM25) climbed +0.64%, and June E-mini Nasdaq futures (NQM25) gained +0.99%.
Stock indexes ended the day moderately higher, with the S&P 500 and Dow Jones Industrials reaching four-week highs. The Nasdaq 100 achieved a five-week high, driven by positive earnings from Microsoft and Meta Platforms, which positively impacted the Magnificent Seven stocks. Microsoft surged over +7% after surpassing expectations with strong Q3 sales and profit growth, while Meta Platforms rose more than +4% following better-than-expected Q1 sales. Thursday’s gains were bolstered further as US manufacturing activity fell less than anticipated. Investors are now looking forward to earnings from Amazon.com and Apple after the market close.
Market sentiment improved as the China Central Television reported US efforts to negotiate tariff issues with China, indicating a proactive approach from Washington.
The latest data revealed that US weekly initial unemployment claims increased by +18,000 to reach a two-month high of 241,000, exceeding the anticipated 223,000. Additionally, continuing claims rose by +83,000 to 1.916 million, marking a 3.5-year high compared to expectations of 1.865 million.
In April, the ISM manufacturing index declined by -0.3 to a five-month low of 48.7, yet this was better than the projected drop to 47.9. Meanwhile, the ISM prices paid sub-index increased by +0.4 to a 2.75-year high of 69.8, though it fell short of the expected 73.0. March construction spending unexpectedly decreased by -0.5% month-over-month, which was below expectations of a +0.2% rise, constituting the largest decline in six months.
Looking ahead, market focus will be on updates related to US tariffs and trade negotiations. On Friday, key reports on April nonfarm payrolls (expected +138,000) and the unemployment rate (projected to remain at 4.2%) will be released. Average hourly earnings are anticipated to rise by +0.3% month-over-month and +3.9% year-over-year.
The market currently reflects a 7% chance of a -25 basis point rate cut following the FOMC meeting on May 6-7. The first quarter earnings reporting season is in full swing, with Bloomberg Intelligence reporting a consensus for Q1 year-over-year earnings growth of +6.7% for S&P 500 companies, a decrease from earlier projections of +11.1%. Of the 303 S&P 500 companies that have reported thus far, 78% have exceeded earnings estimates. Corporate profits for the full year 2025 are projected to rise by +9.4%, down from a previous forecast of +12.5% in January.
Internationally, stock markets also closed higher. The Euro Stoxx 50 and China’s Shanghai Composite were closed for the Labor Day holiday. Japan’s Nikkei 225 climbed to a one-month high with a +1.13% gain.
Interest Rates
June 10-year T-notes (ZNM25) closed down -11.5 ticks, with the 10-year T-note yield rising by +6.7 basis points to 4.229%. T-note prices fell after hitting a 3.5-week high on Thursday due to long liquidation pressures, following data that US manufacturing indices fell less than expected. Additionally, the stock market rally reduced the safe-haven demand for T-notes.
T-notes initially gained traction on carryover support from a rally in 10-year UK gilts. However, the rise in weekly jobless claims to a two-month high introduced dovish implications for Federal Reserve policy.
European government bond yields increased on Thursday. The 10-year German bunds did not trade as Germany was observing the Labor Day holiday. Conversely, the 10-year UK gilt yield rebounded from a three-and-a-half-week low of 4.415% to finish up +4.0 basis points at 4.481%.
Swaps are indicating a 100% likelihood of a -25 basis point rate cut by the ECB at the June 5 policy meeting.
US Stock Movers
Microsoft (MSFT) led the gainers in the Dow Jones Industrials, closing up more than +7% after reporting Q3 revenue of $70.07 billion, surpassing the consensus estimate of $68.48 billion.
Meta Platforms (META) also saw significant gains, closing up over +5% after Q1 sales reached $42.3 billion, better than the consensus of $41.4 billion.
Carrier Global (CARR) led the S&P 500 with an increase of over +11% after reporting Q1 sales of $5.20 billion, slightly above the consensus of $5.19 billion, while raising its full-year sales estimate to $23.0 billion.
Quanta Services (PWR) rose more than +9% after reporting Q1 EPS of 96 cents, exceeding expectations of 79 cents, and increasing its full-year adjusted EPS estimate to $10.05-$10.65.
IDEXX Laboratories (IDXX) saw a gain of more than +8% after reporting Q1 EPS of $2.96, better than the consensus of $2.81.
Following Meta Platforms’ increased spending in AI, Arista Networks (ANET) closed up over +6%. Other AI-infrastructure stocks like Applied Digital (APLD) and Vertiv Holdings (VRT) also saw gains.
CVS Health (CVS) rose by more than +4% after reporting Q1 adjusted EPS of $2.25, exceeding the consensus of $1.69.
Wayfair (W) closed up over +4% after reporting Q1 net revenue of $2.73 billion, surpassing the consensus of $2.71 billion.
Align Technology (ALGN) gained over +3% after reporting Q1 net revenue of $979.3 million, exceeding the consensus of $976.4 million.
On the downside, Beckton Dickinson & Co (BDX) dropped more than -18% after cutting its full-year adjusted EPS forecast to $14.06-$14.34. Qualcomm (QCOM) fell by over -8% after its Q3 revenue forecast was below expectations. Eli Lilly (LLY) closed down more than -11% after adjusting its full-year EPS forecast downward.
Additional declines included Church & Dwight (CHD) and Confluent (CFLT), which fell more than -7% and -19%, respectively, following disappointing sales reports or forecasts.
Earnings Reports (5/2/2025): AES Corp/The (AES), Apollo Global Management Inc (APO), Cboe Global Markets Inc (CBOE), Chevron Corp (CVX), Cigna Group/The (CI), DaVita Inc (DVA), DuPont de Nemours Inc (DD), Eaton Corp PLC (ETN), Exxon Mobil Corp (XOM), Franklin Resources Inc (BEN), Monster Beverage Corp (MNST), T Rowe Price Group Inc (TROW).
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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
