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Stocks gained ground Thursday on well-received earnings from a pair of blue chips. While upside was contained early on by a few disappointing mega-cap results and uneven economic data, the main equity indexes rallied into the close to end the month at new record highs.
Alphabet (GOOGL) found itself on the positive side of the ledger, adding 10% after the Google parent reported higher-than-expected first-quarter earnings and revenue. Google Services revenue was up 16% year over year, while Google Cloud revenue surged 63%. The company also hiked its quarterly dividend by 5%
Additionally, Alphabet raised its full-year capital expenditures guidance to $190 billion from $180 billion. In Q1, GOOGL spent nearly $36 billion on “technical infrastructure to support the AI opportunities we see across the company,” according to Chief Financial Officer Anat Ashkenazi.
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“GOOGL delivered exceptional Q1 results,” says CFRA Research analyst Angelo Zino. “AI momentum is generating high ROI across the ecosystem, with Gemini models processing 16B tokens per minute (+60% Q/Q) and driving usage expansion across core products, including Search revenues of $60.4 billion.”
Meta Platforms (META), on the other hand, slumped 8.6% after the Facebook parent’s user growth came in lower than expected. Specifically, Meta had 3.56 billion daily active people (DAP) in Q1, below analysts’ forecast for 3.62 billion.
Meta’s capital expenditures in the first three months of the year also came in below estimates, even as the company lifted its full-year capex forecast to a range of $125 billion to $145 billion.
Still, the social media giant beat on the top and bottom lines for Q1.
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“You can’t tell from the market reaction, but Meta delivered another very strong quarter, with advertising momentum clearly accelerating,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.
The analyst adds that the upwardly revised capex guidance is largely a result of “higher memory pricing rather than any change to the investment plans,” which makes today’s sell-off seem “like an overreaction.”
Fellow mega-cap and Magnificent 7 stock Microsoft (MSFT, -3.9%) also closed lower after earnings, while Amazon.com (AMZN) ended with a modest 0.8% post-earnings gain.
Caterpillar pops 10% after beat-and-raise quarter
Elsewhere on the earnings calendar, Caterpillar (CAT) reported stronger-than-anticipated first-quarter earnings and revenue thanks to solid demand in its power energy segment, which supplies AI data centers. Its construction unit also saw impressive growth.
The construction equipment giant, whose results are often seen as a bellwether for the broader economy, raised its full-year revenue forecast, now expecting growth in the low double-digit percentage range vs its prior outlook for a roughly 7% increase.
CAT soared 9.9% in reaction, easily making it the best Dow Jones stock today. It was also the blue chip stock‘s biggest one-day gain since October. At $890 per share, Caterpillar has one of the greatest influences on the price-weighted Dow Jones Industrial Average, which rose 1.6% to 49,652.
The S&P 500 added 1.0% to 7,209 and the Nasdaq Composite jumped 0.9% to 24,892 — new record closing highs. All three indexes notched strong monthly gains, too, with the Nasdaq posting its strongest month since April 2020.
GDP, PCE miss the mark
As for today’s economic reports, the Bureau of Economic Analysis (BEA) said the U.S. economy grew at a 2% annualized pace in the first quarter — slower than the 2.2% pace economists’ expected.
Separately, the BEA said the Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred measure of inflation — rose 0.7% from February to March and was up 3.5% on an annual basis.
Core PCE, which excludes volatile food and energy prices, increased 0.3% month over month in March and 3.2% year over year.
“Growth near 2% is being powered by AI-driven investment, while inflation, particularly core PCE, remains elevated,” says Gina Bolvin, president of Bolvin Wealth Management Group. “Markets are parsing that split. A strong labor backdrop and solid spending support the expansion, but persistent inflation keeps the Fed sidelined.”
Bolvin adds that these reports represent a cycle “where innovation is lifting growth, but inflation is limiting how far markets can run.”