Thank the Earnings
The Nasdaq Composite and the S&P 500 hit all-time records pushed by strong earnings reports from various companies and healthy growth in gross domestic product. Twitter, Coca-Cola and McDonald’s where some of the prominent stocks that rose this Friday after beating analyst estimates on earnings.
Google’s parent company, Alphabet, took a lead in the lift by reporting a jump in revenue for its latest quarter, adding $79 billion in market value. It raised a 9.6% making the company’s best single-day percentage gain in years and its biggest dollar gain ever. Alphabet’s market cap addition was larger than the individual market values of all but 72 other companies in the S&P500.
We believe that the strength of the U.S. consumer, evident in some of the latest financial results and economic data, as well as expectations of the rates cut, has helped move the market in an upward motion. The Commerce Department showed that gross domestic product grew at a 2.1% annual rate in the second quarter, above the 2% value expected by economists surveyed by the Wall Street Journal. On Friday, the S&P 500 rose 22.19 points or 0.7% to 3025.86. Nasdaq, tech-heavy, gained 91.67 points, 1.1% growth, to 8330.21. The Dow Jones Industrial Average had 51.47 points up, 0.2%, to 27192.45, ascending slower in growth.
Is Growth Too Good for the Two Fed Cuts?
For the past month, the Federal Reserve policy makers have been teasing two potential cuts on the 10-year interest rate benchmark to bolster the slowing economy. The recent economic data shows that the U.S. economy is doing fine, and it seems the Fed is likely to cut rates next week anyway. The report from the Commerce Department underscored the divide that has opened up between confident consumers and worried businesses. Consumers are likely responding to the strength of the job market, which is putting more people at work and raising wages and salaries. However, many businesses, particularly those with global exposure such as multinationals and manufacturers, are getting affected by economic weakness overseas. We believe the Fed might do a cut in September as it seeks to cover for any weaknesses.