Stocks ripped higher this morning on strong quarterly results from Meta (NASDAQ: META), reported last evening. The Dow, S&P, and Nasdaq Composite all gained with tech leading the way.
META shares surged over 14% in response to its major earnings “beat.” The company surpassed estimates with ease ($2.64 EPS reported vs. $1.96 expected) while providing optimistic forward guidance.
Caterpillar (NYSE: CAT) reported earnings as well but revealed an unexpectedly large inventory build, suggesting that demand may be shrinking. CAT has long been viewed as a “canary in the coalmine” for the global economy. The inventory surprise gave investors yet another slowdown signal following a month’s worth of conflicting economic data.
Big Tech earnings have impressed thus far, though, alleviating fears among some analysts.
“The market was waiting with bated breath for Big Tech,” said LPL Financial strategist Quincy Krosby.
“Across the board, it hasn’t disappointed, and the market needed that.”
Next up are Amazon (NASDAQ: AMZN) and Intel (NASDAQ: INTC), both of which report earnings this evening. Tech bulls are hoping for even more gains tomorrow.
“The common theme here is that tech is stronger than most people think,” explained Jefferies analyst Brent Thill.
“Yes, we’re fading, but things are a lot better than the bears have been expecting.”
We’ll see if that trend holds. If it does, the market could experience a split between Big Tech and everyone else, where the S&P’s top tech names outperform the field.
“This week’s Equity performance highlights the divergence due to low market breadth,” read a morning note from JPMorgan analysts.
“As we look to close out the week, earnings remain the focal point and Tech has, so far, delivered to support the bull case.”
After AMZN and INTC report this evening, the market’s focus will shift back to rates with the May FOMC approaching. The current hiking cycle is likely to come to a close with a 25 basis point hike on May 3rd.
As usual, Powell’s post-hike press conference will be more important than the hike itself. Until then, however, don’t be surprised if markets tick higher prior to another reversal following the rate increase.
