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Strong earnings reports pushed the S&P 500 and Nasdaq to new record highs

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The main Wall Street indexes ended the week with gains after the strong reports of technology giants such as Alphabet and Intel and the better than expected growth in US gross domestic product, which pushed the S&P 500 and Nasdaq to new record highs.

The broad index S&P 500 added 0.74% to its value and closed the session at a record level of 3,025.86 points. The technology Nasdaq Composite also peaked, adding 1.11% to 8,330.21 points. The blue-chip index Dow Jones Industrial Average advanced by 51.47 points to 27,192.45 points.

The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 4.55% to 12.16.

SP500 index

The main US indexes narrowed the growth shortly after the Director of the National Economic Council Larry Kudlow said that he did not expect a “big deal” to be reached during the US and China trade talks next week.

S&P 500 and Nasdaq achieved stable weekly growth of 1.7% and 2.3%, respectively. Dow Jones advanced with a minimum of 0.1% this week.

At a macroeconomic level, the US economy has grown by 2.1% in the second quarter. It surpassed expectations of the analysts for a 1.8% jump. Growth was boosted by a 4.3% increase in consumer spending that offset a 5.5% decline in business investment.

The data were published at a time when investors expect a potential fall in Fed interest rates next week. Market expectations for a 25 basis point cuts were 78.6% on Friday morning, according to the CME Group FedWatch. The Federal Reserve is expected to begin its two-day monetary policy session on Tuesday. The announcement of the interest rate decision is scheduled for Wednesday.

On bond markets, the yields on 10-year US Treasuries remained unchanged at 2.774%, while the returns on 30-year bonds declined by 0.009% to a level of 2.594%.

Corporate stocks performance

The stocks of Google’s parent Alphabet Inc rose by 9.6% after the company reported better-than-expected earnings on Thursday and announced a major 25 billion USD redemption program.

Twitter’s shares rose more than 8% after the announcement of second-quarter results that surpassed analysts’ expectations. The social network also announced a 14% increase in active daily users.

The stock of consumer companies like Starbucks and McDonald’s also contributed to growth. The stocks of the coffee chain rose by 8.9% after it announced strong sales growth. The shares of the fast-food chain rose by 0.5% after reporting of better-than-expected earnings.

Coca-Cola Company was the best performing component of the blue-chip index Dow Jones with its stocks rising by 2.07%. The stock closed higher by about 4% this week. Earlier in the week, RBC analyst Nik Modi reiterated an “outperform” rating on the stock while upping his price target by 4 USD to 60 USD, implying decent upside from Friday’s close.

The stocks of Procter & Gamble Company was also into the green, rising by 1.74%. The gain could be a case of investors buying into the stock in advance of the July 30 earnings report. The company is expected to report a profit of 1.06 USD per share, up from 0.94 USD a year earlier.

The shares of Verizon Communications added 1.31% despite news that regulators are allowing T-Mobile’s acquisition of Sprint to move forward.

Amazon dipped 1.5% after the company reported mixed second-quarter earnings and lower-than-expected growth of 37% in Amazon Web Services — its most lucrative business.

The top performers on the S&P 500 were Universal Health Services Inc (+10.89%), Alphabet Inc Class C (+10.45%) and Alphabet Inc Class A (+9.62%), while on the flipside were Mohawk Industries Inc (-17.60%), Cabot Oil & Gas Corporation (-12.07%) and Xilinx Inc (-5.35%).

Corporate earnings reports

Alphabet Inc reported second-quarter net income of 9.95 billion USD, or 14.21 USD per share, compared with 4.54 USD per share in the year-ago period. Revenue was 38.94 billion USD, up 19% from the same quarter a year ago. Analysts surveyed by FactSet had estimated 11.10 USD per share on revenue of 38.15 billion USD. Google properties led the way in revenue with 27.3 billion USD, up 18% from 23.3 billion USD in the year-ago quarter. Additionally, Google announced a 25 billion USD stock repurchase plan.

Twitter announced its Q2 results with revenue of 841 million USD, up 18% on a year ago, with EPS and net income respectively at 1.43 USD and 1.1 billion USD, a huge bump due to a “significant income tax benefit” related to the establishment of a deferred tax asset for corporate structuring for certain geographies. Without that, non-GAAP diluted EPS was 0.20 USD on non-GAAP adjusted net income of 156 million USD. Monetizable Daily Active Users — Twitter’s new, preferred audience metric — is now at 139 million, which Twitter says is up 14% on a year ago.