(In paragraph 14, please read Abbvie fell “as much as 9%” instead of “87.4%” corrects percentage)
By Sinéad Carew, Sruthi Shankar and Ankika Biswas
(Reuters) -The tech-heavy Nasdaq led a Wall Street rally on Thursday as a strong update from Facebook parent Meta Platforms outweighed concerns over slowing U.S. economic growth.
Shares in Meta soared 15% to touch the highest in more than a year after the company forecast quarterly revenue above estimate, and CEO Mark Zuckerberg said AI was increasing traffic to Facebook and Instagram and boosting ad sales.
The S&P 500 communication services index rallied 5.7% to lead sectoral gains, set for its biggest single-day percentage gain since early February. Along with Meta, it got a boost from Alphabet Inc, which reported upbeat results earlier this week, and Comcast, whose results impressed on Thursday.
Shares of other megacap companies also rose with Microsoft Corp up 2.8% while Amazon.com Inc jumped 5.2% ahead of its results after the market closes.
“It’a a risk on day. People are clearly focused on earnings. The earnings from Meta and Microsoft have been really good overshadowing the slowdown in GDP growth and the increase in inflation,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
But Zaccarelli noted that economic data released on Thursday made the story was less positive. It showed U.S. economic growth slowed more than expected in the first quarter as an acceleration in consumer spending was offset by businesses cutting back on inventory investment.
“All things being equal the macro data this morning were very negative. With the market up this much after that data it shows that investors are looking past macro … Earnings reports have been very good. Its definitely not irrational exuberance.”
Expectations for first-quarter earnings have drastically improved, with analysts projecting a 2.4% year-over-year drop for profits at S&P 500 companies versus the 5.1% decline forecast at the start of the earnings season.
The Dow Jones Industrial Average rose 416.39 points, or 1.25%, to 33,718.26, the S&P 500 gained 63.96 points, or 1.58%, to 4,119.95 and the Nasdaq Composite added 259.25 points, or 2.19%, to 12,113.60.
Eli Lilly and Co advanced 2.4% on raising its full-year profit forecast, while Comcast rose 9% as it beat estimates for quarterly profit, thanks to broadband services demand and higher theme park attendance.
Slower GDP growth mostly reflected a drag from weak inventory investment. The Federal Reserve still is expected to raise interest rates by another 25 basis points next week.
The U.S. House of Representatives on Wednesday narrowly passed a bill to raise the government’s $31.4 trillion debt ceiling that includes sweeping spending cuts. The bill is expected to get stalled in the Senate.
EBay Inc climbed 4.6% after the e-commerce company forecast current-quarter revenue above projections.
AbbVie Inc fell as much as 9.1% after the drugmaker missed quarterly revenue estimates for its newer treatments, while heavy machinery maker Caterpillar Inc dipped 1.8% as a flat order backlog signaled demand may have peaked.
Advancing issues outnumbered declining ones on the NYSE by a 2.81-to-1 ratio; on Nasdaq, a 1.84-to-1 ratio favored advancers.
The S&P 500 posted 12 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 34 new highs and 180 new lows.
(Reporting by Sinéad Carew in New York, Sruthi Shankar and Ankika Biswas in BengaluruEditing by Vinay Dwivedi and David Gregorio)
