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Stocks Higher on Dovish Fed, Solid Earnings; GDP Growth Estimate Disappoints

Robust European earnings, a dovish Fed, trillions in new stimulus and a big IPO has Wall Street in a bullish mood Thursday.

The Thursday Market Minute

  • Global stocks power higher following record earnings in Europe, a regulatory pause in China and a dovish Federal Reserve.
  • Fed Chair Jerome Powell insists tapering is "some ways away" as he notes Delta variant risk to U.S. recovery.
  • Senate lawmakers inching towards breakthrough on $1.2 trillion stimulus deal.
  • Shell, Airbus and Volkswagen issue robust second-half outlooks on a busy earnings day in Europe, echoing U.S. corporate bullishness.
  • Robinhood prices its highly-anticipated IPO at $38 per share, valuing the online trading platform at $31.8 billion ahead of its Nasdaq debut.
  • U.S. equity futures suggest a firmer open on Wall Street following second quarter earnings from Merck, Mastercard, Comcast and T-Mobile as well a. weaker-than-expected Q2 GDP growth estimate.

U.S. equity futures moved higher again Thursday, powered by a series of better-than-expected earnings from European blue chips, a dovish message on rates and tapering from the Federal Reserve and the prospect of a breakthrough on stimulus bill talks in Washington. 

Gains were stalled, however, after a weaker-than-expected first estimate of second quarter GDP growth, which was pegged at 6.4% against the Street consensus forecast of 8.5%. 

European stocks hit a fresh record high, in fact, following the busiest earnings day of the year for regional markets, with big name companies such as Volkswagen  (VWAGY) , Shell  (RDS.A)  and Boeing rival Airbus SE  (EADSY)  all forecast solid second-half earnings and improving consumer demand. 

Apple  (AAPL)  rival Samsung Electronics echoed that bullishness with its detailed second quarter earnings update, forecasting a return to 2019 levels for handset demand as well a robust outlook for memory chips following a 54% increase in operating profits for the three months ending in June.

With corporate leaders sounding bullish on near-term profits, investors were also buoyed by the patient and accommodating tone of Federal Reserve Chairman Jerome Powell, who reiterated his view that the U.S. economy was still "some ways away" from levels of growth and inflation that would trigger a change in the pace of its $120 billion in monthly bond purchases. Rate hikes, he, added, "aren't even on the radar yet". 

Add that to reports of a breakthrough on stimulus negotiations in Washington, where Senate lawmakers are getting closer to a bipartisan deal that could pump another $1.2 trillion into the broader economy, and you have a potent and profitable mix for U.S. markets heading into the tail end of the week.

Ford  (F)  shares were marked 3.5% higher in pre-market trading after the carmaker boosted its 2021 profit forecast following stronger-than-expected second quarter earnings, with CEO Jim Farley noting "signs of improvement in the flow of chips" at this point in the third quarter.

That said, a muted outlook for ad sales from Facebook  (FB)  took the sheen off a strong second quarter, which saw revenues rise 55% to $29.1 billion and profits leap 100% to $3.61 per share, with shares in the social media giant falling 3.5% in pre-market trading.

Futures contracts tied to the Dow Jones Industrial Average are indicating a 140 point opening bell gain while those liked to the S&P 500 are priced for a 7.5 point bump to the upside.

Facebook's weakness, as well as pre-market declines for Uber Technologies  (UBER)  and PayPal  (PYPL) , helped push Nasdaq Composite futures lower to indicate an opening bell dip of around 20 points.

Uber was stung by a report that a key investor, Japan's Softbank, had sold 45 million shares in the ride-sharing group, ostensibly to raise cash for losses it may have incurred in the China tech selloff. Shares were down 4.5% in pre-market trading.

PayPal slumped 5% after the online payments group forecast muted third quarter earnings as it continues to navigate eBay's  (EBAY)  transition to its own managed payment platform.

Overnight in Asia, moves by China regulators to sooth investor concerns over a crackdown on big tech companies gave shares in Shanghai and Shenzen a boost, lifting the region-wide MSCI ex-Japan benchmark 2.1% higher heading into the close of trading.

Japan's Nikkei 225, meanwhile, closed 0.73% higher at 27,782.42 points.

Oil prices were also on the move Thursday, with WTI crude futures for September delivery rising 50 cents to $72.89 per barrel after the energy department reported a 4.1 million barrel decline in domestic crude stocks, taking overall stockpiles to the lowest levels since January 2020.