On Thursday, April 27, 2023, U.S. stocks rallied in a broad market surge driven by strong earnings reports from major tech companies, helping investors to overlook signs of economic weakness. The S&P 500 and the Dow Jones Industrial Average recorded their largest percentage gains since early January, while the Nasdaq Composite saw its biggest one-day percentage gain since mid-March.
Key Takeaways:
✅ Strong corporate earnings helped drive a broad rally in the U.S. stock market.
✅ Economic data released before the bell showed the U.S. economy slowed more than expected in the first quarter.
✅ Despite the weaker-than-expected GDP report, financial markets’ bets on another rate hike at the Fed’s policy meeting.
✅ Treasury yields gained ground across the board as investors weighed the looming debt ceiling showdown in Washington.
✅ Crude oil prices rose for the first time in three sessions overnight, but gains were limited as data showed U.S. growth.
Earnings Reports Boost Tech Companies
The upbeat earnings reports from Meta Platforms Inc, Microsoft Corp, and Alphabet Inc, among others, provided the fuel for the rally. This was in stark contrast to the economic data released earlier in the day, which showed the U.S. economy slowed more than expected in the first quarter of 2023, even as price growth came in hotter than economists had projected.
Labor Market Tightness and Inflation
The initial claims for unemployment benefits fell, indicating that the labor market remained tight, a significant driver of inflation. At the same time, the Bureau of Economic Analysis released its advance estimate of first-quarter U.S. gross domestic product (GDP), which showed that the economy grew at an annualized pace of 1.1%, slower than what economists had projected. The print came in significantly cooler than the previous two quarters, which saw annualized growth at 2.9% and 3.2%, respectively.
Core Personal Consumption Expenditures (PCE) Increase
The Core PCE, which is a closely watched inflation gauge for the Federal Reserve, increased by 4.9%, excluding food and energy prices, higher than the expected 4.7% increase.
Market Movement and Treasury Yields
The Dow Jones Industrial Average rose 524.59 points, or 1.58%, to close at 33,826.46. The S&P 500 gained 79.4 points, or 1.96%, to 4,135.39, and the Nasdaq Composite added 287.89 points, or 2.43%, to 12,142.24.
Meanwhile, Treasury yields climbed as investors weighed the looming debt ceiling showdown in Washington and signs that inflation could remain stubbornly high, even as the economy slows. Benchmark 10-year notes last fell 25/32 in price to yield 3.5242%, from 3.43% late on Wednesday. The 30-year bond last fell 37/32 in price to yield 3.7544%, from 3.689% late on Wednesday.
Dollar Index and Crude Oil Prices
The Dollar Index rose nominally higher following the weaker-than-expected GDP report, which did little to affect financial markets’ bets on another rate hike at the Fed’s policy meeting next week. Crude oil prices rose for the first time in three sessions overnight as bulls sought to steer the oil trade away from global economic worries. WTI crude rose 0.62% to settle at $74.76 per barrel, while Brent settled at $78.37 per barrel, up 0.88% on the day.
Gold and Cryptocurrency Prices
Gold prices inched lower as the Dollar strengthened. Spot gold dropped 0.1% to $1,988.19/oz. Bitcoin (BTC) was recently trading at around $29,400, up about 2.32% over the past 24 hours, while Ether (ETH) followed a similar pattern, jumping almost 2.89% over the past 24 hours to change hands at around $1,920.
