The stock market experienced a mixed session on Thursday, with the Dow Jones Industrial Average outperforming other indices, driven by positive earnings from International Business Machines (IBM). Despite a slow start, blue-chip stocks managed to shine, while other sectors faced challenges.
Key Takeaways
- Dow Jones Outperforms: The Dow Jones Industrial Average rose by 0.2%, closing at 39,935, thanks to IBM’s strong earnings report.
- Mixed Market Performance: The S&P 500 slipped by 0.5% to 5,399, and the Nasdaq Composite added 0.9% to 17,181.
- Economic Indicators: The U.S. economy grew at an annual rate of 2.8% in Q2, surpassing expectations.
- Durable Goods Decline: Orders for durable goods fell by 6.6% from May to June, marking the first decline in five months.
- Single-Stock Movements: Notable movements included Bank of America, Chipotle Mexican Grill, and Ford Motor.
Economic Growth Surpasses Expectations
The first reading of the second-quarter gross domestic product (GDP) showed that the U.S. economy grew at an annual rate of 2.8%, significantly higher than the first quarter’s 1.8% and economists’ expectations of 2%. This data supports the "soft-landing" narrative, suggesting that the economy is stabilizing despite potential future volatility.
Durable Goods Orders Fall
Data from the Census Bureau revealed a 6.6% drop in durable goods orders from May to June, the worst reading since the pandemic’s onset and the first decline in five months. Economists caution that this sharp decline may overstate weakness in capital expenditures demand, especially as companies face higher financing costs and election-related uncertainties.
Single-Stock News
Bank of America
Bank of America (BAC) saw a 1.2% decline after regulatory filings showed that Warren Buffett’s Berkshire Hathaway sold over 52 million shares of the financial stock. This move could be attributed to profit-taking or tax reasons, given BAC’s 31% year-to-date increase through mid-July.
Chipotle Mexican Grill
Chipotle Mexican Grill (CMG) shares fell by 1.9% despite beating analysts’ expectations for its second quarter. The company’s strong performance was driven by new store openings and an 11.1% increase in comparable-restaurant sales. However, concerns about margin impacts led to a downgrade from CFRA Research.
Ford Motor
Ford Motor (F) experienced an 18.4% plunge, its biggest one-day drop since 2008, after missing earnings expectations for the second quarter. Despite this, the automaker raised its full-year outlook for free cash flow.
IBM’s Positive Earnings Boost Dow
IBM’s stock rose by 4.3% after the company exceeded top- and bottom-line expectations for its second quarter and increased its 2024 free cash flow forecast. This positive performance contributed to the Dow’s outperformance, highlighting the importance of free cash flow estimates for investor confidence.
Market Summary
- Dow Jones Industrial Average: +0.2% to 39,935
- S&P 500: -0.5% to 5,399
- Nasdaq Composite: +0.9% to 17,181
The mixed market signals underscore the complexity of the current economic landscape, with strong corporate earnings juxtaposed against broader economic uncertainties.
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