U.S. Stocks Rebound Amid Mixed Earnings and Ahead of Nonfarm Payrolls Data

Alexander Garcia
02 May, 2024
Miami

Investors shook off rate jitters and bid up stocks amid earnings optimism. 

Benchmark indexes on Wall Street edged higher after investors shifted their attention to corporate quarterly results and key economic data releases. 

The S&P 500 index and the Nasdaq Composite turned higher in early trading as investors reviewed the latest comments from Federal Reserve Chair Jerome Powell. 

The U.S. Federal Reserve held steady in its policy rate range between 5.25% and 5.50%, as widely anticipated by most market participants. 

The Federal Reserve also noted that inflation is still too high but added that it is unlikely that the next policy move will be a rate increase. 

Fed Chairman Jerome Powell said that the central bank is prepared to keep rates high as long as needed until it gains greater confidence that inflation is on the path of its target rate of 2%. 

The Federal Reserve also announced its plans to slow down its quantitative tightening starting June 1. 

The move is likely to contribute to lowering interest rates and ease the liquidity crunch in the financial system. 

The Federal Reserve is holding about $7.4 trillion of Treasury securities on its balance sheet, and the Fed has been shrinking its balance sheet after it expanded to $9 trillion at the start of 2022 from pre-pandemic $4 trillion. 

The central bank plans to reduce its monthly sale of Treasury securities to $25 billion from the current target of up to $60 billion beginning June 1st. 

Investors shook off rate jitters and bid up stocks amid earnings optimism. 

On the economic front, initial claims of jobless benefits were below market expectations for the fourth week in a row, suggesting labor market tightness. 

The initial jobless benefits claims were unchanged from the previous week at 208,000 in the week ending on April 27, the U.S. Department of Labor reported Thursday. 

Continuing claims matched the previous claims at 1,774 million, the lowest since January, indicating persistently tight labor market conditions. 

 

Trade Deficit Held Steady In March Near 10-month Low 

The overall goods and service trade deficit was nearly unchanged in March, the Bureau of Economic Analysis reported Thursday. 

Exports declined 2% from the previous month to $257.6 billion, and imports decreased 1.6% to $327.0 billion, resulting in a trade deficit of $69.4 billion. 

Exports of goods decreased $5.1 billion to $171.3 billion and services fell $0.2 billion to $86.4 billion in March, after sales of civilian aircraft, travel services, and petroleum products fell.

Imports of goods decreased $4.3 billion to $263.8 billion, and services fell $1.1 billion to $63.2 billion in March, amid the decline in demand for passenger cars, pharmaceuticals, home goods, and travel services. 

The deficit with China increased from $2.2 billion to $24.1 billion in March. Exports decreased $0.5 billion to $12.7 billion, and imports increased $1.7 billion to $36.8 billion.

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.4% to 5,040.27, and the Nasdaq Composite rose 0.5% to 15,738,22. 

The yield on 2-year Treasury notes edged higher to 4.95%, 10-year Treasury notes inched lower to 4.61%, and 30-year Treasury bonds edged lower to 4.75%.

WTI crude oil increased $0.09 to $79.09 a barrel, and natural gas prices increased 9 cents to $2.02 a thermal unit.

Gold decreased by $24.71 to $2,299.14 an ounce, and silver fell 19 cents to $26.56. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.70.

 

U.S. Stock Movers

DoorDash plunged 9.9% to $114.80 after the food delivery company reported a wider-than-expected loss in its latest quarter. 

Carvana soared 35% to $118.0 after the automotive retailer reported higher-than-expected revenue in the first quarter. 

eBay Inc. declined 3.8% to $49.11 after the online marketplace operator estimated weaker-than-expected revenue in the current quarter. 

Qualcomm increased 5.2% to $172.78 after the advanced chipmaker reported better-than-expected earnings in its latest quarter and issued strong guidance for the current quarter. 

Moderna rose 1.9% to $113.67 after the vaccine maker reported a smaller-than-expected quarterly loss in its latest quarter after the company trimmed operating costs. 

Wayfair Inc. advanced 7.5% to $54.31 after the online furniture retailer reported a narrower loss in its latest quarter, partly driven by layoffs. 

Peloton Interactive increased 13% to $3.61 after the company announced its plans to lay off 15% of its staff, and chief executive officer Barry McCarthy will be stepping down. 

McCarthy will act as a strategic adviser to the company through the end of the year, and chairperson Karen Boone and director Chris Bruzzo will assume the roles of interim co-CEO. 

 

Rate Anxieties Keep European Markets Volatile

European markets traded sideways as investors debated future interest rate paths and the manufacturing sector outlook. 

Benchmark indexes in Frankfurt and Paris edged lower after the U.S. Federal Reserve held steady its benchmark interest rate range between 5.25% and 5.50%. 

Investors debated the spillover effect of the higher-for-longer U.S. interest rates on the currency union's rate path. 

The European Central Bank has signaled that it is ready to cut its interest rates as early as June, but the central bank has not clarified the size of or the number of subsequent cuts in the year. 

Market sentiment was further dented after an ongoing downturn in the manufacturing sector deepened in April. 

 

Manufacturing Sector Woes Deepened In April 

HCOB Eurozone Manufacturing PMI declined to 45.7 in April from 46.1 in March, S&P Global reported in its final reading on Thursday. 

Any reading below the 50-mark indicates contraction, and any reading above the 50-mark shows expansion. 

Market indexes in London traded higher after strong earnings from Standard & Chartered and Shell PLC lifted market sentiment. 

 

Europe Indexes and Yields

The DAX index decreased by 0.2% to 17,896.50.18; the CAC-40 index fell by 0.9% to 7,914.65; and the FTSE 100 index inched higher by 0.6% to 8,172.15. 

The yield on 10-year German bonds edged up to 2.55%; French bonds inched lower to 3.04%; the UK gilts edged lower to 4.31%; and Italian bonds inched higher to 3.87%.

The euro edged higher to $1.069; the British pound inched higher to $1.251; and the U.S. dollar edged higher to 91.25 Swiss cents.

Brent crude increased $0.13 to $83.58 a barrel, and the Dutch TTF natural gas fell by €2.02 to €30.88 per MWh.

 

Europe Stock Movers

Shell PLC gained 1% to 2,847.51 pence after the oil giant reported better-than-expected first-quarter earnings and announced a $3.5 billion stock repurchase plan. 

Standard Chartered increased 5.4% to 732.60 pence after the financial services provider reported stronger-than-expected first-quarter profit amid elevated interest rates and higher demand for its wealth management services. 

Smurfit Kappa Group advanced 4.5% to 3,638.0 pence after the packaging material maker reported first-quarter revenue of €2.7 billion. 

Hugo Boss declined 9.4% to €45.77 after the German fashion retailer reported better-than-expected first-quarter earnings and projected revenue growth in the current year. 

Teleperformance increased 8.2% to €92.50 after the French business service provider said first-quarter revenue rose 26.7%, driven largely by the integration of the Dutch rival Majorel last year. 

Novo Nordisk decreased 2.5% to DKK 875.60 despite the Danish pharmaceutical company reporting better-than-expected first-quarter earnings. 

Vestas Wind System declined 3.2% to DKK 180.85 after the Danish wind turbine maker reported a surprise loss in the first quarter. 

 

Tokyo Indexes Struggle After Tech Stock Weakness

Stocks in Tokyo declined, and the yen rebounded for the second day in a row, amid tech stock weakness and the possible intervention by the central bank. 

The Nikkei and the Topix indexes lacked direction in Thursday's trading after the U.S. Federal Reserve held rates steady but signaled that the future rate path is highly uncertain. 

Fed Chair Jerome Powell also ruled out the possibility of a rate hike in the immediate future and confirmed that inflation has moderated over the last year, but progress has stalled in recent months. 

Closer to home, the minutes of the Bank of Japan's policy meeting held on March 18 and 19 showed Thursday that policymakers believe the central bank's inflation target of 2% is within reach. 

Moreover, the monetary base increased 2.1% from a year ago in April to 689.896 trillion yen, and the adjusted monetary base soared 11.4% from a year ago. the Bank of Japan said Thursday. 

The Japanese yen rebounded for the second day in a row to 155.70, stoking speculation that the Bank of Japan, in coordination with the ministry of finance, intervened for the second day in a row. 

Tech stocks in the U.S. sold on the worry that higher rates are likely to stay elevated amid positive U.S. economic data and resilient labor market conditions. 

The Nikkei 225 Stock Average decreased 0.07% to 38,245.08, and the Topix index declined a fraction to 2,729.17. 

Tech stocks in Japan followed the weakness in New York. 

Tokyo Electron, Advantest, Socionext, SoftBank, and Screen Holdings decreased between 0.3% and 1.8%. 

Financial stocks were also among the leading decliners after the U.S. rate decision announcement. 

Sumitomo Mitsui Group declined 1.2% to ¥8,881.0, Mitsubishi UFJ fell 0.5% to ¥1,557.50, and Mizuho Financial Group eased 0.3% to ¥3,010.0.

 

Sumitomo Pharma Plunges On Lowered Annual Outlook 

Sumitomo Pharma dropped 7% to ¥373.0 after the company reported lower-than-estimated revenue and higher-than-estimated losses in the fiscal year 2024 ending in March. 

Revenue was revised lower to 314.6 billion yen from the previous estimate of 317 billion yen, and net loss attributable to shareholders was revised higher to 315 billion yen from the previous estimate of 147 billion yen. 

The loss per share was revised to 792.86 yen from the previous estimate of 354.90 yen. 

The company also suspended its dividend after the sharp decline in core profit. 

 

Hong Kong Stocks Rebound Amid Bargain Hunting

Stocks in Hong Kong advanced after investors returned from a holiday, and financial markets in China are closed for the week. 

Optimism ruled Hong Kong trading after the U.S. Federal Reserve held steady its benchmark rate, driving financial and insurance stocks higher. 

The Hong Kong Monetary Authority held its reference rate steady at 5.75%, following the move by the U.S. Federal Reserve, under its linked exchange rate system reflecting the Hong Kong dollar's peg to the U.S. dollar. 

The interest rate move supported the rise in financial and insurance stocks, and HSBC, Ping An, and AIA rose between 0.9% and 3.5%. 

Property developers rose after the interest rate decision announcement, and U.S. Federal Reserve Chair Jerome Powell ruled out rate hikes in the near future. 

Longfor Group added 7.3% to HK$12.72, China Vanke soared 10.5% to $5.10, and China Resources Land jumped 4.5% to HK$29.65. 

Henderson Land increased 1.4% to HK$24.20, and Sun Hung Kai Properties jumped 2.4% to HK$74.05. 

The Hang Seng index rose 2.2% to 18,150.91, and the Hang Seng Tech index jumped 3.5%. 

Tech leaders also participated in the market rally, and Tencent Holdings, Meituan, Baidu, and Alibaba Group jumped between 2% and 9%. 

 

EV Makers Report Mixed Sales In April Amid Fierce Price War

Electric vehicle makers were in focus after the three leading makers reported mixed sales in April amid a brutal price war as the automakers struggled to gain market share amid slowing domestic demand growth. 

Li Auto jumped 2.2% to HK$106.30 after the electric vehicle maker said April sales decreased 0.4% from the previous month to 25,787 units.

Sales in the first four months to April 2024 advanced 35.6% from a year ago to 106,187 units. 

Xpeng soared 7.4% to HK$33.90 after the company said electric vehicle sales in April rose 4% from the previous month to 9,393 units. 

Year-to-date sales rose 23% to 31,214 vehicles. 

The company is engaged in a brutal price war amid fierce competition in the mid-price segment for cars priced between 200,000 and 300,000 yuan. 

BYD jumped 4.3% to HK$225.60 after the largest electric vehicle maker in China said sales in April rose 3.6% to 313,245 units. 

Year-to-date sales surged 49% to 210,295 units. 

Nio soared 21.4% to HK$43.40 after the electric vehicle maker said April sales soared 31.6% from the previous month to 15,620 units, the largest monthly increase among the four leading automakers. 

Sales in the first four months of April rose 21% from a year ago to 45,673 units.