Wall Street Rallies After Above-Consensus Earnings From Tech Giants

Shares in Meta Platforms (META) jumped 12.88% week-over-week (up 99.70% year-to-date) to touch the highest in more than a year after the company reported quarterly revenue exceeding Wall Street analysts’ expectations. CEO Mark Zuckerberg said the AI work is driving good results across the apps and business, increasing traffic to Facebook and Instagram and boosting ad sales. This followed revenue and earnings from Microsoft (MSFT) and Alphabet (GOOG) topping estimates for the first quarter. Both stocks were up 7.52% and 2.18% respectively.

The tech-heavy Nasdaq (up 1.28% for the week) led the stock market rally as the strong update from mega cap companies outweighed concerns over slowing U.S. economic growth. The benchmark S&P 500 gained 0.87%, in line with the Dow Jones Industrial Average (up 0.86%). At the same time, it’s worth noting that the Cboe Volatility Index dropped below the 16 threshold, reaching the lowest level in more than eighteen months.

By contrast, European stock indexes ended the week mostly lower, with the MSCI EMU losing 0.83%. The FTSE fell 0.55% while the CAC 40 shed 1.13% as investors took some profits after strong gains in the previous weeks.

In Asia, Japan’s Nikkei 225 index rose 1.02%, extending its winning streak to three weeks. China’s Shanghai Composite Index added 0.67%. India’s Nifty 50 index gained 2.50%. On the flip side, Korea’s Kospi Composite index dropped 1.64%.

Big tech boost

Five of the top 11 S&P 500 sectors advanced, with the communication services sector, which includes Meta and other growth stocks, jumping 3.76% to its highest in eight months. It’s also the best sector for the year: +24.46%. The IT sector was not far behind, up 2.43% (+22% year-to-date) in the wake of Apple (APPL: +2.82%) and Microsoft stocks as mentioned above. The real estate sector fared well (+1.50%). It still lags behind the broad market in 2023 (+1.88% YTD) though REITs may be interesting in today's economic environment as they can offer protection against inflation.

The utilities sector was the worst performer this week (-0.99%, -2.29% YTD). Financials also lost momentum (-0.19% for the week, -3.22% YTD) amid worries about First Republic Bank (FRC) after the beleaguered lender reported a more than $100 billion flight in deposits for the first quarter. FRC stocks tanked by 75% to a record low of $3.51.