On Thursday, U.S. markets closed on a high note: S&P 500 and Nasdaq 100 reached new all-time highs. The main driver? A strong quarterly report from Alphabet, Google’s parent company. Investors saw it as confirmation that demand for artificial intelligence solutions remains not only stable, but rapidly growing.
Tech Stocks Shine — But Not for Everyone
Alphabet surprised Wall Street by beating revenue expectations, boosting confidence in the tech sector overall. Shares of Microsoft, Amazon, Nvidia and other giants also advanced, continuing their recent rally.
But not all tech names had a good day. Tesla fell more than 7% after posting weak financial results — its largest revenue drop in over a decade. CEO Elon Musk warned of a "rough road ahead" for the next year or more. Concerns over EV market saturation and rising competition weighed heavily on sentiment.
Legacy Giants Pull Down the Dow
It wasn’t just Tesla facing trouble. Shares of IBM plunged over 7% following disappointing software sales. The Dow Jones Industrial Average, traditionally sensitive to large-cap earnings misses, came under pressure as a result.
U.S. Economy Sends Mixed Signals
Macroeconomic data painted a conflicting picture. On the positive side, jobless claims unexpectedly fell to a three-month low of 217,000, signaling resilience in the labor market.
But on the flip side, the U.S. manufacturing PMI dropped sharply to 49.5 — the lowest in 7 months and well below expectations of 52.7. Sales of new homes and core capital goods orders also missed forecasts.
This contrast — a strong labor market but weakening industrial momentum — presents a dilemma for the Federal Reserve. Futures suggest only a 3% chance of a rate cut in July and 63% odds for a cut in September.
Global Markets: Gains with a Side of Uncertainty
European equities also closed higher. Euro Stoxx 50 rose 0.2%, Japan’s Nikkei hit a fresh yearly high with a 1.59% jump, and China’s Shanghai Composite gained 0.65%.
The European Central Bank (ECB) left rates unchanged and noted that inflation is nearing its 2% target. However, President Christine Lagarde warned of persistent downside risks for the eurozone economy.
In Germany, consumer sentiment fell unexpectedly, and new car registrations in the eurozone posted their largest drop in 10 months (-7.3%).
Treasuries React to Trade Optimism and Weak Data
The yield on the 10-year U.S. Treasury rose to 4.412% as optimism about new trade deals (including with Japan and potentially the EU) reduced demand for safe-haven assets.
Still, weaker PMI data and disappointing home sales helped Treasuries recover from their lowest levels.
Earnings Season: A Tale of Two Markets
Earnings reports remain in focus. According to Bloomberg Intelligence, profits for S&P 500 companies could grow 3.2% in Q2, better than the pre-season forecast of 2.8%.
Yet, only six of eleven S&P 500 sectors are expected to post earnings growth — the weakest breadth since Q1 2023.
Thursday's Winners and Losers
Top Gainers:
West Pharmaceutical Services (+22%): Strong Q2 sales and raised full-year guidance.
United Rentals (+8%): Beat revenue expectations and expanded buyback program.
Labcorp, T-Mobile, ServiceNow, Las Vegas Sands, A.O. Smith all beat estimates and raised forecasts.
Biggest Decliners:
LKQ Corp (-17%): Missed EPS expectations.
Dow Inc. (-17%): Posted deeper operating losses than expected.
Molina Healthcare, Chipotle, Tesla, IBM, Southwest Airlines, American Airlines all disappointed with weak results or lowered full-year guidance.
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