May 2, 2025

For the eighth straight session, the major averages moved higher for the first time since August, as Dow component MSFT plus META after the big tech companies reported profits for the start of the year that were even bigger than analysts expected.

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The Dow ended with a closing gain of 83 to 40,752  led by AMZN, AAPL ahead of their earnings, in addition to JPM, MSFT after its earnings and NVDA, which is starting to come to life again.

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The S&P ended with a gain of “only” 35 to 5604 and this was a disappointment as it was trading higher around 65 for most of the session and then sure enough, opposite to the day before, it collapsed by 30 points in the final 10 minutes, which just goes to show how much maneuvering takes place at the end, because the day before, it exploded to the upside in those final 10 minutes. There is no known fundamental factors for this but one can say that someone is “smart enough” to know that on that late Wednesday upside romp, someone “figured out” that things would get better today, and on today’s late selloff, someone “knew” that the Nasdaq would start out weaker because of the lower AMZN and AAPL results. But this changed to better after a report that the U.S. and China are supposedly in some kind of talks about the tariff issue. And then the April jobs report came in better than expected as well, leading to a higher opening today.

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The Nasdaq ended higher by 264 up to 17,710 led by the usual better tech stocks but is going to start out today on the downside because of the results just mentioned.

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The Russell 2000 just dragged upward by 11 points to 1975 and the VIX ended down to 24.60.

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MSFT rallied by 8% after the software giant said strength in its cloud computing and artificial intelligence businesses drove its overall revenue up 13% from a year earlier.

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META, the parent company of Facebook and Instagram, also topped analysts’ targets for revenue and profit in the latest quarter. It said AI tools helped boost its advertising revenue, and its stock climbed 4%.

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They are two of the most influential stocks within the S&P and other indexes because of their massive sizes, and they weren’t alone. CVS, CCG and a bevy of other companies also joined the stream of better-than-expected profit reports that have helped steady things over the last week. The S&P now is back to within 9% of its record set earlier this year, after briefly dropping nearly 20% below its best level.

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Still, plenty of uncertainty remains about whether the President’s trade war will force the economy into a recession. Even though companies have been reporting better profits for the first three months of the year than analysts expected, many CEOs are remaining cautious about the rest of the year.

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GM cut its forecast for profit in 2025, for example. It said it is assuming it will feel a hit of $4 billion to $5 billion because of tariffs, and it expects to offset at least 30% of it. One Dow stock, MCD fell after reporting weaker revenue for the latest quarter than analysts expected, even though its profit was slightly above forecasts. An important measure of performance at its U.S. restaurants had its worst decline since 2020, when COVID shuttered the global economy, and its CEO said consumers “are grappling with uncertainty.”

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It joined CMG and other restaurant chains that have seen customers get more cautious amid all the unknowns about the economy and inflation that is still higher than many would like.

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The uncertainty has already shown up in surveys of consumers, which say pessimism is shooting higher about where the economy heading. On Thursday, a couple reports about the economy came in mixed, following up on several recent updates that suggested it’s weakening.

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The weekly jobless claims said that more workers filed for unemployment benefits (241K) last week than economists had forecast, setting the stage for a more comprehensive report on the job market arriving today.

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But a later update said U.S. manufacturing activity was better last month than economists had feared, though it still contracted again.

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The fear is for a possible worst-case scenario called “stagflation,” where the economy stagnates yet inflation remains high. The Federal Reserve has no good tools to fix both such problems at the same time. If the Fed were to try to help one problem by adjusting interest rates, it would likely make the other worse.

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Some encouraging news on inflation did arrive on Wednesday, when the P.C.E. report said that the measure of inflation the Fed likes to use slowed in March.

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In the bond market, Treasury yields swiveled following Thursday’s economic reports. The yield on the 10-year Treasury initially fell below 4.13% after the worse-than-expected update on joblessness. But it later trimmed its losses following the better-than-expected report on manufacturing and rallied to 4.21%. which is up from 4.17% late Wednesday.

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Hopes that Trump may eventually roll back some of his tariffs after reaching trade deals with other countries also helped to support markets.

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A social media blog by China’s state broadcaster claimed that the Trump administration has been seeking contact with the world’s second largest economy through multiple channels to start negotiations over tariffs.

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The earnings calendar really starts to pick up with: yesterday - Dow component MSFT higher in addition to META, ZG, ANET, ALGN, CVS, HOOD, SHAK, W, RBLX but YUM, EBAY, QCOM, BDX, MELI, LLY, QGEN and Dow component MCD were lower; today - Dow components AAPL and CVX are lower in addition to XYZ, ABNB, DD, TTWO, while ROKU, RDDT, MSTR and even Dow component AMZN are up.  

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Economic reports will show: yesterday – weekly jobless claims jumped to 241,000, the highest in four years; today the April jobs report came in higher than expected at 177,000 while the unemployment rate remained at 4.2%, average hourly earnings gained 0.2% and 3.8% year over year, the average workweek rose to 34.3, the labor force participation rate rose to 62.6 hours.