Stocks jumped out of the gate Friday and never looked back. Sentiment got a major lift thanks to a positive reaction to Apple’s (AAPL) quarterly earnings report and a bad-news-is-good-news jobs report.
The excitement got started late Thursday when Apple reported higher-than-expected earnings and revenue for its fiscal second quarter. The iPhone maker also unveiled a record $110 billion stock buyback program and its 12th straight annual dividend hike.
“We believe these results appear to change the narrative on the AAPL story, as China is holding up better than expected and there are a host of upcoming events and catalysts on the horizon that could improve investor sentiment and drive consensus estimates higher,” says CFRA Research analyst Angelo Zino, who maintained a Buy rating on Apple after earnings.
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One of those events occurs next Tuesday, May 7, when Apple is expected to unveil new iPads for the first time in two years.
Amgen rallies after earnings, weight-loss drug news
Apple stock surged 6.0% after earnings, but it was far from the best Dow Jones stock today. Rather, that title went to Amgen (AMGN), which spiked 11.8% after its earnings report.
The drugmaker reported earnings of $3.96 per share on $7.45 billion in revenue, more than analysts expected. More notable was news Amgen is discontinuing the development of its weight-loss pill and instead preparing for a Phase III study of its obesity injectable, MariTide. Amgen executives said Phase II data for the weight-loss drug is encouraging and will be released later this year.
“While we appreciate there is still plenty of work ahead (full Phase II data, starting Phase III, etc.), the reality is AMGN probably has a ‘monthly’ drug on their hands and can be a $5 billion to $10 billion-plus player in the future,” says Jefferies analyst Michael Yee (Buy). “This should drive a re-rating of the stock as it remains very under-owned across the Street.”
Jobs report shows wage growth cools
On the economic front, investors were busy dissecting the April jobs report. Data from the Bureau of Labor Statistics showed the U.S. added 175,000 new jobs in April, the smallest increase in six months. The unemployment rate edged up to 3.9% from 3.8% and average hourly earnings – a measure of inflation – rose 3.9% year-over-year vs March’s 4.1% increase.
“In an environment where the market is worried about inflation, a softer jobs report with (slightly) higher unemployment, lower-than-expected wage growth and job creation shows that inflation pressure from wages is easing,” says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
Following Federal Reserve Chair Jerome Powell’s press conference this week where he indicated more rate hikes were unlikely, “the market is back to risk-on mode as long as the Fed maintains an easing bias,” Zaccarelli adds.
Indeed, at the close, the Dow Jones Industrial Average was up 1.2% at 38,675, the S&P 500 was 1.3% higher at 5,127, and the Nasdaq Composite had gained 2.0% to 16,156.
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