S&P 500 rises almost 3.0%, tries to recover 4,300

• US stocks have enjoyed a strong tech-led rally on Thursday after stronger-than-expected earnings from Meta Platforms.
• The S&P 500 was up nearly 3.0% to break above 4,300 and the Nasdaq 100 was up nearly 4.0%.
• But the main US indices remain on track to post heavy losses for the month and the macroeconomic backdrop remains difficult.

Stronger-than-expected earnings results from Facebook parent company Meta Platforms, which saw FB shares last trade up more than 18% on the session, ignited a tech-led rally in stock markets. from the US on Thursday. Tech giants Microsoft (+2.1%), Alphabet (+4.1%), Apple (+4.2%) and Amazon (+5.0%) are up, with other big tech names posting solid gains as well. As a result, the information technology index was last trading around 4.0%, communication services rose 4.4% and consumer discretionary rose 2.9%.

Optimism in the tech space was contagious with the remaining eight major sectors also gaining at least 1.0% on the day, with energy performing remarkably well with a 3.0% gain as crude prices rose. In terms of the major US indices, the S&P 500 index last traded up just 3.0% after rebounding to the 4,300 level for the first time this week. Techs said a break above this key level could open the door next week for a push towards resistance above 4,350 in the form of mid-April lows (at 4,380) and the 50-day moving average ( about 4,390).

Amid outperformance in big tech, the Nasdaq 100 last traded just shy of 4.0% higher near 13,500, which would mark the index’s best one-day performance of the year. Meanwhile, the Dow Jones last traded a respectable 2.0% higher near 34,000. US equities were unfazed by data showing a surprise contraction in US GDP in the first quarter, which analysts explained as temporary weakness as a result of high imports and due to rampant Covid-19 infections at the time. Some cited month-end flows as support as major asset managers and pension funds are likely to need to increase their exposure to equities to mitigate the impact of severe losses this month.

Indeed, while Thursday’s strong rally lightened the mood somewhat for US equity investors, it has been a torrid month. The S&P 500 is currently on track to post a drop of more than 5.0%, a similar scale to the January drop. Meanwhile, the Nasdaq 100 Index is on track to post a drop of just over 9.0%, which would mark the worst one-month decline since 2008 and leaves the index flirting once again with “bear market” territory (that is, say, more than 20%). below recent highs). Meanwhile, the Dow Jones is on track for a more modest 2.0% monthly loss.

A combination of bearish factors, including nerves over aggressive Fed monetary tightening, a slowdown in global growth, protracted inflation, geopolitics (war and sanctions between Russia and Ukraine), and the risk of a China lockdown, have been cited. as factors weighing on the market this month. Given recent developments on the latter two fronts, pessimism about prolonged inflation rising and global growth slowing is likely to go nowhere anytime soon and the Fed appears to be on autopilot until rates return. to be neutral.

May is likely to be another tough month for investors. One reason for optimism would be if earnings season continues to go well, which it has so far. According to Reuters citing Refinitiv data, as of Thursday, 81% of the 237 S&P 500 companies that reported earnings had beat analysts’ expectations, above the historical average rate of 66%.

Technical levels