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By Alex Eule
| Thursday, April 28 Bouncing
Back. It was an
extraordinary day for stocks. The tech-heavy Nasdaq Composite
gained 3% in one session, with the large-cap S&P 500
up 2.5%. Shares of Facebook's beleaguered parent
company jumped 18%. That it came on the heels of the first quarterly
contraction in economic growth since early in the pandemic made it all the
more remarkable. U.S. real gross domestic product fell 1.4%
in the first quarter, according to the "advance" estimate from the Bureau
of Economic Analysis. The decline comes as something of a
surprise, with economists generally expecting growth of 1.1%. The economy
grew at a heady 6.9% rate in the fourth quarter, but worries have been
mounting since amid persistent inflation, Russia's invasion of Ukraine, and
quickly rising yields in the bond market. This doesn't mean we're in a
recession — the official definition requires two consecutive quarters of
declines — but it certainly validates the worries. And yet, investors were ready to move on,
sending stocks up at the open, and pushing them higher from there. There was some reason to look past the
headline number. My colleague Megan Cassella notes that
"the underlying data shows consumer demand and private investment
remained strong to start off the year." A rise in imports was partially responsible
for the decline, Megan writes: The drop-off in the first quarter was led by
a surge in imports, which count as a subtraction in the calculation of GDP
and jumped to a record high in March as Americans began buying more goods
from overseas. That reflects in part what [Comerica Bank's Bill] Adams called
a huge backlog of ships waiting to be unloaded in U.S. ports at the end of
2021 that were not ultimately delivered until the first quarter of 2022. It’s also likely an effect of how the U.S.
economy has recovered more rapidly than others have around the world, meaning
Americans are purchasing more goods from abroad than foreign nations are
buying U.S. products. ... Gains in consumer spending, housing and
private-sector investment added 3.2% to growth for the first quarter, up from
their 2.4% contribution in late 2021, noted Diane Swonk, chief economist at
Grant Thornton. “Yes, you read that correctly,” Swonk wrote.
“The most important aspects of the domestic economy held up better than they
did at the end of 2021, when growth was soaring.” Investors seemed more than happy to see the
silver lining. Earnings reports helped too. Meta
Platforms, Facebook's
parent, ended up
18%, its best day in nearly nine years. Fintech firm PayPal
and chip maker Qualcomm also delivered
better-than-expected reports, causing their stocks to pop. See all of Barron's
earnings coverage here. Tech earnings continued after the market
close, but the news was decidedly more mixed. That could mean today's rally
proves short-lived. More on that below. |
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DJIA: +1.85% to 33,916.39 The Hot Stock: Meta
Platforms +17.6% Best Sector: Technology /
Communications Services +4.0% |
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