Stocks Soared Yesterday On Strong Earnings Ahead Of This Morning's PCE Inflation Report  Image: Bigstock Stocks closed sharply higher yesterday, led by the Nasdaq's 2.43% gain. Wednesday afternoon's positive EPS surprise by Meta (Facebook), along with yesterday morning's positive EPS surprises by Comcast, Honeywell, and Hershey to name a few, lifted stocks. The surprises kept coming after the close with Amazon posting a positive EPS surprise of 47.6%. They were up 4.61% in the regular session leading up to their report. And then jumped another 10% immediately after they reported in after-hours trade. Although, those gains disappeared after a couple of hours with Amazon trading down more than -2%. So we will see how they do in the regular session today. Snap posted a positive EPS surprise after the close as well, to the tune of 200%, but posted a negative sales surprise of -1.84%. Shares were up 6.28% in the session leading up to their report, but then plunged by -20% in after-hours trade. While Amazon's after-hours gains faded, Snap's after-hours losses seemed to stick.
Getting back to Thursday's gains, in addition to the positive earnings reports yesterday (not to mention all week long from the likes of Microsoft, Alphabet (Google), and McDonald's), the other thing that I think lifted stocks yesterday was the lower than expected Q1 GDP report. The expectation was for 2%, but instead it came in at 1.1%. Why is that good news? Because it shows the Fed's rate hikes are indeed slowing the economy down. Not so much to kill off growth, but enough to slow down inflation. And that lower GDP number just gave the Fed even more ammo to call it quits, if they were looking for additional data points to justify it. The expectation is still for one more 25 basis point rate hike when they give their FOMC announcement on May 3. That would put the Fed Funds rate at the 5.1% level they have been forecasting. But then they would presumably hold it there until year's end. This morning's Personal Consumption Expenditures (PCE) index could seal the deal if it can confirm what the CPI and PPI indexes have been saying, which is inflation is on the decline. The consensus is looking for a 0.1% m/m change for the headline number, while the y/y change is expected to come in at 4.2% vs. last month's 5.0%. The core rate (ex-food & energy) is expected to be up 0.3% m/m, with the y/y rate coming in at 4.5% vs. last month's 4.6%. That comes out with the Personal Income and Outlays report at 8:30 AM ET. In other news yesterday, Weekly Jobless Claims fell -16,000 to 230K vs. the consensus for a gain to 249K.
The Pending Home Sales Index declined -5.2% m/m vs. the consensus for 0.4%. The index slipped to 78.9 vs. last month's 83.2. And the Kansas City Fed Manufacturing Index fell to -10 vs. last month's print of 0. Today, in addition to the PCE index, we'll get the Employment Cost Index, the Chicago PMI report, and Consumer Sentiment. We'll also get more earnings, and from plenty of oil companies including Exxon Mobil, Chevron, and Imperial Oil to name a few. But again, the main event will be this morning's PCE index. Should be a busy day. And if all goes well, we could see a long-awaited upside breakout in the major indexes. Best,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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