U.S. stocks on Thursday are adding to their big gains from the day before, led by Meta Platforms and other companies that delivered better-than-expected profit reports.
The S&P 500 was 0.7% higher in early trading. The Dow Jones Industrial Average was up 73 points, or 0.2%, as of 9:45 a.m. Eastern time, and the Nasdaq composite was 0.9% higher.
Stocks got a boost as the 10-year Treasury yield fell back to where it was in February following reports that seemed to give more leeway for the Federal Reserve to cut interest rates soon. A day earlier, yields sank after Fed Chair Jerome Powell gave the clearest indication yet that inflation may have slowed enough for an easing of rates to begin in September.
Meta Platforms, the company behind Facebook and Instagram, blasted 9.6% higher after reporting profit and revenue for the spring that topped analysts’ expectations.
Uncertainty was high heading into its report after other members of the highly influential group of stocks known as the "Magnificent Seven" had underwhelmed investors. This handful of Big Tech stocks drove the S&P 500 to dozens of records this year, in part on the frenzy around artificial-intelligence technology, but their momentum turned last month on worries investors had taken their prices too high and expectations had grown too difficult.
Some of the concern has centered around how much companies are investing in AI, and how quickly they will see profits because of it. Meta Platforms said late Wednesday that it expects “significant” growth in spending and investment next year on AI research and product development.
While analysts said such spending will have an impact on its near-term results, Meta Platforms highlighted how it’s already seeing some benefits from it, including traction with its AI glasses.
Other technology companies, though, got a less welcome reception from investors. U.K. chip giant ARM Holdings delivered better profit and revenue for the latest quarter than expected, for example. But its U.S.-listed shares nevertheless tumbled 9.9%. It did not increase its forecasts for revenue and profit this fiscal year, despite its strong numbers to start it.
Amazon and Apple, which like Meta Platforms are also members of the “Magnificent Seven,” will report their latest results after trading finishes for the day. Apple rose 0.5%, and Amazon climbed 1.7%.
In the bond market, the yield on the 10-year Treasury fell to 4.00% from 4.04% late Wednesday and from 4.70% in April. That’s a significant move for the bond market and has given stock prices a boost.
More U.S. workers filed for unemployment benefits last week, an indication that layoffs may be rising. While that’s bad news for workers, it could help bring the job market into the type of Goldilocks environment that Wall Street is hoping for: not so hot that it puts upward pressure on inflation but not so cold that it leads to a recession.
Another report suggested productivity for U.S. workers improved by more during the spring than economists expected. Growth there could also prevent upward pressure on inflation.
Traders are already convinced that the Federal Reserve will cut its main interest rate in September, which would take it down from a two-decade high. The question now is how many times it may cut this year and next.
Across the Atlantic, the Bank of England cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. Inflation in the U.K overall had already hit the bank’s target of 2%, something the U.S. central bank is still reaching for.
The FTSE 100 in London rose 0.3%, but stock indexes were weaker across much of Europe and Asia.
Japan's Nikkei 225 fell 2.5%. A day earlier, the Bank of Japan raised interest rates, a move that helped push up the value of the yen against the U.S. dollar. Such swings can hurt the profits of exporters. Toyota's stock tumbled Thursday even though it reported a rise in profit, for example.