The market was up sharply during the regular session, but what will tomorrow bring?
The stock market delivered an extremely strong rebound on Thursday, as investors seemed to decide that the selling pressure that financial markets had faced over the past several weeks had been overdone. Gains for the major market indexes ranged from less than 2% for the Dow Jones Industrial Average (^DJI 1.85%) to more than 3% for the Nasdaq Composite (^IXIC 0.00%), with the S&P 500 (^GSPC 2.48%) landing in the middle.
| Index | Daily Percentage Change | Daily Point Change |
|---|---|---|
| Dow | +1.85% | +614 |
| S&P 500 | +2.47% | +104 |
| Nasdaq | +3.06% | +383 |
DATA SOURCE: YAHOO! FINANCE.
As has been the case all week, most investors paid closest attention to the news coming out of the after-hours trading session. Late this afternoon, Apple (AAPL 4.52%) and Amazon.com (AMZN 4.65%) were among the companies reporting their latest financial results, and the two tech bellwethers served as a key indicator of what investors should expect in Friday’s stock market session and for much of the rest of 2022.
Apple keeps setting records
Shares of Apple were down a bit more than 1% in the after-hours session, giving back a portion of the stock’s 4% gains during the regular trading session. The company’s latest quarterly results showed continued success for the business overall, although some pockets of weakness gave some shareholders a bit of anxiety about what the future could bring.
Apple’s results for the fiscal second quarter ending March 26 featured solid growth. Revenue rose 9% year over year to $97.3 billion, which was a record figure for this part of the calendar year. Net income rose a more modest 6% to $25.01 billion, and that translated into earnings of $1.52 per share.
Apple’s various businesses saw varying degrees of growth. On the services side, revenue was higher by 17% to $19.8 billion, but that was slightly slower than Apple has seen in recent quarters. Meanwhile, product sales were up almost 7% year over year. Gross margin improved, but a 19% rise in operating expenses kept bottom-line gains somewhat in check.
Apple pointed to the iPhone and Mac segments, as well as its wearables, home, and accessories business as standing out, leaving out the iPad as a potential drag on results. Nevertheless, with many having feared that Apple would fare much worse, shareholders took the news relatively well, and a 5% boost to the dividend and a new $90 billion stock-buyback plan was icing on the cake for investors.
Amazon gives up ground
Shares of Amazon.com didn’t do nearly as well. The stock was down more than 12% in after-hours trading following its first-quarter financial release.
The numbers from Amazon told the story. Net sales were up 7% to $116.4 billion, even after accounting for a 2 percentage point hit from currency impacts. However, operating income was down substantially from year-ago levels, falling from $8.9 billion a year ago to just $3.7 billion in this-year’s period. Moreover, a massive charge related to the decline in the value of Amazon’s holdings in Rivian Automotive (RIVN 3.08%) stock caused Amazon to lose $3.8 billion in the quarter, or $7.56 per share.
Amazon’s segments told very different pictures. North American retail saw sizable sales gains, but a bigger jump in operating expenses caused Amazon to lose money on an operating basis there. International sales were actually lower year over year, causing a similar hit. However, Amazon Web Services remained solidly profitable, with segment revenue rising 37% and segment operating income soaring 57% from year-ago levels.
Investors also didn’t seem comfortable with Amazon’s second-quarter guidance, which featured revenue projections of $116 billion to $121 billion and calls for operating results of between a loss of $1 billion and a gain of $3 billion. With so much uncertainty and a slowdown in growth, Amazon is finally seeing the anticipated slowdown following a time of extremely sharp sales and profit gains during the initial years of the COVID-19 pandemic.
