Stocks fell Friday after a record-setting session a day earlier, with stocks taking a pause after strong earnings results and more encouraging economic data helped fuel the latest leg higher in risk assets. Still, however, the three major indexes posted strong gains for the month of April.
The S&P 500 dropped about 0.7%, after the index closed at an all-time high of more than 4,200 on Thursday. The index’s monthly gain came out to 5.2%, or its best since its nearly 11% rise in November 2020. The Dow and Nasdaq each also retreated during Friday’s session. However, the Dow was still up more than 2.5% in April, while the Nasdaq gained more than 5%.
Shares Amazon (AMZN) bucked the trend and jumped to a record high after reporting first-quarter results and current-quarter guidance that exceeded expectations, with online shopping still booming even as more in-person businesses reopen. Shares of Twitter (TWTR), on the other hand, sank after its current-quarter revenue guidance fell short of estimates, disappointing investors who had hoped to see a stronger pick-up in the company’s ad sales to match trends seen at peer social media companies like Snap (SNAP) and Facebook (FB). Overall, companies comprising about two-thirds of the S&P 500 market capitalization have so far reported results, and 84% of these have topped estimates, according to data from Credit Suisse analyst Jonathan Golub.
Equities have climbed to new highs this week amid these signs of rebounding corporate profits and economic activity, and after more dovish messaging from the Federal Reserve. A new report Thursday showed U.S. gross domestic product increased at a 6.4% annualized rate in the first quarter, bringing overall output within striking distance of its pre-pandemic levels.
Though concerns over rising inflation during the economy and possible eventual tax hikes remain, investors have at least temporarily set aside these fears until more developments emerge on both fronts.
“The economic backdrop is still very encouraging. I think there’s a lot of really strong tailwinds behind this recovery, whether it’s the vaccination story, the fiscal stimulus story, and very clearly an earnings season that’s done very well,” Jack Manley, JPMorgan Asset Management global market strategist, told Yahoo Finance. “But it wouldn’t necessarily surprise me if markets moved more or less sideways moving forward.”
“I think what we’re going to see, as we’ve seen throughout the course of this year, is a continued story of winners versus losers,” he added. “So we still have to be careful about security selection, about sector selection, moving forward. And to me, I think a lot of that has to do with this continued rotation into some of the more cyclical parts of the market.”
Others struck a similar tone.
“This positive backdrop does not mean that the current period of low volatility will persist. We expect bouts of market turbulence, as investors fret over rising inflation and the uneven global progress in combating the pandemic,” Mark Haefele, chief investment officer of global wealth management at UBS, wrote in a note Thursday. “With global stocks close to record highs, the market is also likely to be vulnerable to disappointing news on the economy or COVID-19.”