An earnings-inspired rally in Meta Platforms (META) fueled gains in the Nasdaq and S&P 500 on Thursday, adding to Fed-related gains registered the day before. However, declines in Merck (MRK) and UnitedHealth (UNH) held back the Dow, which finished with a factional retreat.
Earnings will continue to be a key driver on Friday, as Amazon (AMZN), Alphabet (GOOG) (GOOGL) and Apple (AAPL) are all set to announce results after the closing bell. Meanwhile, Friday will also see the release of the latest jobs data.
“The stock market continues its move upwards, as it believes that we’re soon going back to normal. While we’re certainly past peak inflation, the Fed made clear yesterday that more work needs to be done,” analyst Leo Nelissen of BN Capital told Seeking Alpha. “Tomorrow’s unemployment/wage numbers could either fuel this rally further (in case of a miss) or once again highlight that underlying inflation numbers are too severe to ignore.”
Nelissen added: “For now, the market continues to trade in my range of low 3,000 points to mid-4,000 points. I believe that the risk/reward is starting to get very unattractive. We’re now at a point where the Fed needs to execute the perfect soft landing without triggering a rebound in inflation expectations. I believe the odds are not in its favor.”
Stocks recorded an afternoon rally on Wednesday following the Federal Reserve’s interest rate announcement. Wall Street focused on comments from Fed Chair Jerome Powell that suggested that recent interest rate increases were starting to tamp down inflation.
The Nasdaq and S&P 500 were able to carry this momentum over into Thursday’s action, bolstered by a 23% rally in META, which announced better-than-expected Q4 revenue and a $40B stock repurchase plan.
However, the Dow finished lower. This came as Merck (MRK) slumped in the wake of its quarterly update, hurt by a disappointing 2023 outlook. UnitedHealth (UNH) also dipped, dented by a low Medicare Advantage payment increase for 2024.