Wall Street rallies as Meta earnings offset economy worries

1 month ago 31
  • Lower inventories restrains Q1 US economic growth
  • Meta up, touts AI might as digital ads boost outlook
  • Eli Lilly up on annual profit forecast raise
  • Amazon.com soars, earnings due after market close
  • Indexes up: Dow 1.25%, S&P 1.58%, Nasdaq 2.19%

April 27 (Reuters) - The tech-heavy Nasdaq led a Wall Street rally on Thursday as a strong update from Facebook parent Meta Platforms outweighed concerns over slowing U.S. economic growth.

Shares in Meta (META.O) soared 15% to touch the highest in more than a year after the company forecast quarterly revenue above estimate, and CEO Mark Zuckerberg said AI was increasing traffic to Facebook and Instagram and boosting ad sales.

The S&P 500 communication services index (.SPLRCL) rallied 5.7% to lead sectoral gains, set for its biggest single-day percentage gain since early February. Along with Meta, it got a boost from Alphabet Inc (GOOGL.O), which reported upbeat results earlier this week, and Comcast (CMCSA.O), whose results impressed on Thursday.

Shares of other megacap companies also rose with Microsoft Corp (MSFT.O) up 2.8% while Amazon.com Inc (AMZN.O) jumped 5.2% ahead of its results after the market closes.

"It'a a risk on day. People are clearly focused on earnings. The earnings from Meta and Microsoft have been really good overshadowing the slowdown in GDP growth and the increase in inflation," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

But Zaccarelli noted that economic data released on Thursday made the story was less positive. It showed U.S. economic growth slowed more than expected in the first quarter as an acceleration in consumer spending was offset by businesses cutting back on inventory investment.

"All things being equal the macro data this morning were very negative. With the market up this much after that data it shows that investors are looking past macro ... Earnings reports have been very good. Its definitely not irrational exuberance."

Expectations for first-quarter earnings have drastically improved, with analysts projecting a 2.4% year-over-year drop for profits at S&P 500 companies versus the 5.1% decline forecast at the start of the earnings season.

The Dow Jones Industrial Average (.DJI) rose 416.39 points, or 1.25%, to 33,718.26, the S&P 500 (.SPX) gained 63.96 points, or 1.58%, to 4,119.95 and the Nasdaq Composite (.IXIC) added 259.25 points, or 2.19%, to 12,113.60.

Eli Lilly and Co (LLY.N) advanced 2.4% on raising its full-year profit forecast, while Comcast rose 9% as it beat estimates for quarterly profit, thanks to broadband services demand and higher theme park attendance.

Slower GDP growth mostly reflected a drag from weak inventory investment. The Federal Reserve still is expected to raise interest rates by another 25 basis points next week.

The U.S. House of Representatives on Wednesday narrowly passed a bill to raise the government's $31.4 trillion debt ceiling that includes sweeping spending cuts. The bill is expected to get stalled in the Senate.

EBay Inc (EBAY.O) climbed 4.6% after the e-commerce company forecast current-quarter revenue above projections.

AbbVie Inc (ABBV.N) fell 87.4% after the drugmaker missed quarterly revenue estimates for its newer treatments, while heavy machinery maker Caterpillar Inc (CAT.N) dipped 1.8% as a flat order backlog signaled demand may have peaked.

Advancing issues outnumbered declining ones on the NYSE by a 2.81-to-1 ratio; on Nasdaq, a 1.84-to-1 ratio favored advancers.

The S&P 500 posted 12 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 34 new highs and 180 new lows.

Reporting by Sruthi Shankar in Bengaluru Editing by Vinay Dwivedi

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