Stocks received a much needed boost on Friday thanks to some better-than-expected economic data and a strong earnings report out of the technology industry. The April jobs report showed more jobs were added to the economy than had been predicted. Meanwhile, Apple’s top and bottom-line results surpassed Wall Street’s estimates.
As a result, all three of the major stock market indices finished the day strongly in the green. The Dow Jones Industrial Average soared nearly 550 points, or 1.65%, while the S&P 500 climbed above the 4,130 level to finish up almost 2%. In addition, the tech-heavy Nasdaq soared over 2% on the day to finish above the 12,230 level.
However, Friday’s rally wasn’t enough to lift stocks higher for the week in what has been a highly volatile market. The Dow and S&P 500 posted losses for the week while the Nasdaq managed to produce modest gains.
The April jobs report revealed that 253,000 jobs were added to the economy in the month compared with estimates for 180,000. In addition, the unemployment rate fell to 3.4% from 3.5% in the prior month, revisiting January levels. Wages are growing, rising 4.4% vs. year-ago levels.
The better-than-expected jobs results came in the face of several economic headwinds, including high inflation and rising interest rates. While the Federal Reserve has hinted at suspending its aggressive path on interest rates, the strong jobs report could potentially throw a wrench into those plans.
Fed Chairman Jerome Powell stated that policymakers would continue to hike rates if there isn’t enough evidence of a slowing economy. Meanwhile, several of the biggest U.S. bank failures in history have unfolded in recent weeks as their balance sheets were weakened in this envioronment. But that does not seem to have interfered with jobs being added to the economy, at least not yet.
Most of the new jobs were added in the education and health sectors, followed by business services, leisure and hospitality, government, construction, manufacturing and retail.
Apple’s fiscal second-quarter results topped Wall Street estimates, fueled by strong iPhone sales that overshadowed lower total sales. The performance helped to improve the mood among investors, sending Apple stock higher by nearly 5% on Friday.
Apple’s earnings per share (EPS) came in at $1.52 compared with estimates of $1.43. Total revenue was $94.8 billion; while it topped estimates of $92.9 billion, it still fell 3% compared with the company’s Q1 performance.
Apple’s iPhone revenue was $51.3 billion in the quarter compared with estimates of $48.8 billion. These results bode well for a recovery in the supply chain, where problems and shortages have weighed on production in recent years.
The company doesn’t provide an official outlook for the rest of the year but management did reveal it expects total revenue in Q3 to fall by approximately 3% vs. the year-ago period, as long as economic conditions don’t get any worse.
Apple appears to be benefiting from the banking crisis that is unfolding among legacy institutions in the U.S. financial system. The company recently launched a high-yield savings product and has already attracted close to $1 billion in deposits. The new offering includes an Apple card offering savers a 4.15% yield.
Warren Buffett on the Markets and Economy
Billionaire investor Warren Buffett weighed in on the state of the markets at the Berkshire Hathaway annual shareholder meeting over the weekend.
Buffett’s company has been investing in big oil lately, including majors like Occidental Petroleum and Chevron, where it has become the largest shareholder. Buffett quashed rumors that Berkshire Hathaway was looking to take over Occidental in an acquisition.
Berkshire Hathaway also considers Apple among its largest stock holdings. While Buffett is tech averse in many ways, he is a big Apple fan, saying that the company is a “better business than any we own.”
Charlie Munger, Buffett’s right-hand man, remarked on the rise of artificial intelligence (AI), saying that while the technology stands to disrupt many industries, it’s not all it’s cracked up to be.
Buffett also warned that what had been an “incredible period” for the economy is over, resulting in a slowdown that will spill over into the profits of many of Berkshire Hathaway’s businesses in 2023.
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