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End of Day Brief - Thursday April 29 - S&P makes a new high

SP 5004211.47+28.29(0.68%)
10-yr Note -2/321.641
NYSEAdv 1685 Dec 1566 Vol 903.0 mln
NasdaqAdv 1865 Dec 2253 Vol 4.8 bln

Industry Watch

Strong: Communication Services, Financials, Energy, Consumer Staples
Weak: Health Care, Information Technology

Moving the Market

-- S&P 500 sets intraday and closing record highs in uneven session

-- Apple (AAPL) and Facebook (FB) delivered strong earnings reports, but AAPL gave up early gain

-- Advance Q1 GDP increased at a 6.4% annualized rate ( consensus +6.5%)

-- Signs of fatigue despite record-setting performance

Stocks end higher as U.S. GDP grows 6.4% in Q1

The major averages were stronger in early trading, dipped into the red by midday, and then recovered to close the session with gains. Investors had a number of newsworthy items to react to, including a pair of mega-cap tech earnings reports, a wave of other quarterly updates, the modestly better than anticipated Q1 GDP gain, the drop in jobless claims to a new post-pandemic low and President Biden having outlined his plan for $1.8T in fresh government spending.

ECONOMIC EVENTS: In the U.S., GDP posted a 6.4% rate of growth in Q1, which was a little stronger than analysts expected. Initial jobless claims declined 13,000 to 553,000 in the week ended April 24. An index of pending home sales bounced 1.9% to a 111.3 reading in March.

TOP NEWS: Shares of Apple (AAPL) finished nearly unchanged following the company's fiscal second quarter earnings report last night. Citi analyst Jim Suva, who raised the firm's price target on Apple to $170 from $150 and keeps a Buy rating on the shares, said it was "almost the perfect quarter" except for two items, which are no guidance for the June quarter and commentary during the conference call that the June quarter will be seasonally weaker than normal due to the March quarter strength of iPhone and lingering supply chain issues.

Shares of Facebook (FB) rose 7.3% after stronger than expected advertising demand drove its advertising revenue 9% above consensus. Among the many Wall Street analysts who raised their price targets on the stock following the company's Q1 beat, Deutsche Bank analyst Lloyd Walmsley and Susquehanna analyst Shyam Patil each raised their targets to $425, while Monness Crespi analyst Brian White raised the firm's price target on Facebook to $460 from $375 and keeps a Buy rating on the shares.

Ford (F) shares slipped 9.4% despite the company having reported better than expected sales and earnings in the first quarter as the automaker also warned that it now assumes that it will lose 10% of planned second-half 2021 production due to consequences from the semiconductor shortage, which it said was made worse by a recent supplier fire in Japan.

Caterpillar (CAT) shares fell 2.1% despite the company reporting better than expected Q1 adjusted earnings and revenue. Of note, the company expects to see "normal seasonality" for Q2, adding that the situation with COVID-19 "remains fluid" and that it is working hard to avoid supply chain issues.

Shares of McDonald's (MCD) gained over 1% after the fast food giant reported upbeat Q1 results, with global comparable sales rising 7.5% year-over-year and U.S. comp sales growing 13.6%.

Meanwhile, Merck (MRK) shares fell 4.4% after the company reported downbeat Q1 earnings and revenue and affirmed its guidance for fiscal 2021.

In COVID-19 news, Moderna (MRNA) increased its COVID-19 vaccine guidance to 800M-1B doses in 2021 and to 3B from 1.4B in 2022.

Additionally, Chesapeake Energy (CHK) shares were 1.7% higher after Reuters reported that the company is working with two banks on the possible sale of its South Texas assets that could bring in as much as $2B.

MAJOR MOVERS: Among the noteworthy gainers was VEREIT (VER), which rose 16% after signing a definitive merger agreement to be acquired by Realty Income (O). Realty Income increased 1% following the news. Also higher was Nokia (NOK), which gained 11.2% in New York trading after reporting quarterly results.

Among the notable losers was Adverum Biotechnologies (ADVM), which dropped 62.3% after releasing information about a suspected unexpected serious adverse reaction in its INFINITY clinical trial evaluating ADVM-022. Also lower was Cara Therapeutics (CARA), which fell 45.4% after reporting no patient reached the primary or secondary endpoints in its KARE phase 2 clinical trial evaluating oral KORSUVA.

Reviewing Thursday's economic data:

  • The advance Q1 GDP report showed economic output increasing at a 6.4% annualized rate ( consensus 6.5%), paced by a 10.7% increase in personal consumption expenditures and a 6.3% increase in government spending. Real final sales of domestic product, which exclude the change in private inventories, surged 9.2%. The GDP Price Deflator was up 4.1% ( consensus 2.6%).
    • The key takeaway from the report is that it is indicative of an economy that is bouncing back sharply with the help of stimulus payments and reopening activity that has been catalyzed by the COVID vaccines.
  • Initial jobless claims for the week ending April 24 decreased by 13,000 to 553,000 ( consensus 530,000). Continuing claims for the week ending April 17 increased by 9,000 to 3.660 million.
    • The key takeaway from this report is located in the four-week moving average for initial claims. It is still too high at 611,750, which is why the Fed isn't going to be in a rush to tighten policy, but at the same time, market participants may warm to the understanding that it's the lowest since March 14, 2020.
  • Pending home sales increased 1.9% in March ( consensus +7.2%) following a revised 11.5% decline in February (from -10.6%).

Looking ahead, investors will receive Personal Income and Spending for March, PCE Prices for March, the Employment Cost Index for the first quarter, the final Univ. of Michigan Index of Consumer Sentiment for April, and the Chicago PMI for April on Friday.

  • Russell 2000 +16.2% YTD
  • S&P 500 +12.1% YTD
  • Dow Jones Industrial Average +11.3% YTD
  • Nasdaq Composite +9.3% YTD

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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