U.S. stocks advanced significantly in late trading on Thursday, with the S&P 500 and Nasdaq Composite indices reaching new record highs. Investors shifted their focus to robust earnings reports from corporate giants such as Amazon, Alphabet (Google's parent company), and Eli Lilly, temporarily setting aside concerns over Middle East tensions and the inflation outlook.
The Dow Jones Industrial Average climbed 842.81 points, or 1.72%, to close at 49,704.62. The Nasdaq Composite rose 222.37 points, or 0.90%, to finish at 24,895.61. The S&P 500 gained 73.62 points, or 1.03%, ending the session at 7,209.57.
Caterpillar's stock surged 10% on Thursday following a quarterly report that exceeded expectations, providing a significant boost to the Dow. The industrial giant, often viewed as a barometer for the global economy, also raised its full-year revenue forecast. This report offered a glimmer of hope for the U.S. economy, which had shown disappointing growth in the first quarter. The U.S. Commerce Department reported on Thursday that first-quarter GDP grew at an annualized rate of 2%, which, while higher than the 0.5% growth in the fourth quarter of 2025, fell short of the 2.2% expectation.
Joining Caterpillar, Alphabet's stock price increased by 9%, providing further support to the broader market. The company reported first-quarter revenue that beat expectations and raised the upper limit of its capital expenditure guidance for 2026 to $1.9 trillion.
Analysts noted that this "earnings-driven" market behavior indicates that strong corporate profitability has temporarily outweighed geopolitical risks. Previously, Brent crude oil prices had touched $126 per barrel due to U.S.-Iran tensions and disruptions to shipping in the Strait of Hormuz, creating upward pressure on oil prices and sparking inflation concerns.
However, not all stocks were in favor. Microsoft and Meta Platforms faced selling pressure after they significantly increased their capital expenditure guidance for AI infrastructure. Meta's stock fell nearly 9% as investors grew concerned about the return period for these massive investments and slowing user growth; the company also raised its full-year capital expenditure forecast.
Microsoft faced similar concerns, with the company stating that expenditures could reach $1.9 trillion due to high memory costs.
Tom Graff, Chief Investment Officer at Facet, commented to a financial network that the most notable aspect of the "Magnificent Seven" tech earnings was the lack of new information. He pointed out that while it is positive from a GDP perspective that these hyperscale companies are "spending so much on physical infrastructure," other worries persist, including issues around company valuations.
Graff stated, "The ongoing question we will grapple with is: will these AI expenditures ultimately translate into software-like profit margins, or will they not, forcing us to re-evaluate these multiples?"
Despite the pressure on some tech stocks, the sector still contributed to a strong monthly performance for the overall market. The S&P 500 has risen approximately 10% since the start of April, on track for its best monthly performance since November 2020. The Nasdaq index has gained about 13%, poised for its strongest monthly showing since April 2020. The Dow is projected to finish April with a gain of over 6%, marking its best monthly performance since November 2024.
Meanwhile, oil prices reversed course on Thursday. Brent crude futures fell 3%, trading above $114 per barrel, while West Texas Intermediate crude futures declined 2%, trading above $104 per barrel. On Wednesday, crude prices had risen due to persistently high tensions between the U.S. and Iran overseas. It was reported that the President had instructed aides to prepare for a long-term blockade against Iran.
Comments