April Ends on High Note

Friday market close

A string of strong earnings reports helped U.S. stocks end the month on a high note, with the broad S&P 500® Index, blue-chip Dow Jones Industrial Average, and tech-focused Nasdaq all notching their second-straight day of gains Friday, despite a slump in retail giant Amazon (AMZN) and a looming meeting by the Federal Reserve's rate-setting committee next week.

Economic data released Friday will surely add to expectations for another quarter-point interest rate increase at the Fed meeting Tuesday to Wednesday. The annual increase in the personal consumption expenditures (PCE) price index—the Fed's preferred inflation gauge—slowed to 4.2% in March from a year earlier, according to the Commerce Department. That's slower than the previous month's 5.1% gain but still more than double the Fed's 2% target. At the same time, a separate department Labor Department report showed workers' salaries grew at a brisk 5% pace in March.

Still, positive earnings reports seem to be the big story Friday.

The market had a bearish bias earlier this month before earnings season got into full swing, "but since earnings are coming in better, we've been seeing some support," says Nathan Peterson, director of derivatives analysis at Schwab.

However, he notes that the S&P has been moving in a broad range of about 3800 to 4300, which is making "it tough to have high conviction either on the bullish or bearish side. It feels like markets are waiting to see what the Fed says next week. Yes, the Fed's expected to hike, but will bank officials signal they are going to pause?" Here's where markets ended today.

• The S&P 500 Index was up 34.13 (0.8%) at 4169.48, a nearly three-month high; the Dow Jones industrial average was up 272.00 (0.8%) at 34,098.16; the Nasdaq Composite was up 84.35 (0.7%) at (12,226.58.

• The 10-year Treasury yield was down about nine basis points at 3.437%.

• Cboe's Volatility Index was down 1.27 at 15.76.

Energy companies were among the strongest sectors today with help from a rally in crude oil futures. Transportation and financial stocks were also strong. Utilities and consumer discretionary sectors were among the weakest sectors.

Read all our market commentary on our Insights & Education page, and you can follow us on Twitter at @SchwabResearch.

Earnings roundup

The following companies reported quarterly results over the past day:

• Amazon fell nearly 4% as concerns over the company's slowing cloud computing business overshadowed slightly better-than-expected reports for quarterly earnings and revenue. Businesses have been curtailing spending on cloud services, Amazon executives said. The company is laying off 27,000 employees.

• Intel (INTC) rose more than 4% despite the semiconductor maker posting a net quarterly loss of $2.8 billion and a 36% plunge in year-over-year quarterly revenue. Those losses weren't as severe as analysts expected, and the company's forecast of a recovery later this year seems to have assured investors.

• Chevron (CVX) rose about 1% after the company reported a 5% rise in first-quarter net profit, beating forecasts, as a strong performance by its refining business helped offset weaker oil and gas production as oil prices slipped.

• Exxon Mobil (XOM) climbed about 2% after the oil major reported adjusted earnings per share of $2.83, about 24 cents above what analysts were forecasting, and record quarterly income of $11.43 billion, more than double the year-earlier level. Revenue of $86.56 billion also came in above expectations.

• Colgate-Palmolive (CL) rose more than 2% after the company's earnings and revenue exceeded expectations. Colgate also raised its annual organic sales forecast, noting consistent price increases and solid demand for its pet nutrition products.

• First Solar (FSLR) slumped about 9% after its report of first-quarter earnings of 40 cents per share came in well below expectations. Revenue of $548 million also lagged expectations by a wide margin.

• Pinterest (PINS) sank 16% following disappointing second-quarter guidance, though the image-sharing company's earnings and revenue topped expectations.

• Snap (SNAP) dropped 18% after revenue expectations fell 6% from a year ago and missed forecasts.

• T-Mobile (TMUS) dropped over 4% after first-quarter revenue of $19.63 billion fell short of expectations.

Next week will also be a busy one for earnings, with over 2,600 companies scheduled to report results, according to Yahoo! Finance.

PCE inflation numbers meet expectations

The PCE price data for March reported before Friday's market open held few surprises. Headline PCE rose 0.1% in March from the month before, while the core rate, which removes food and energy, rose 0.3%, both largely consistent with expectations. "It will be a long and bumpy road to the Fed's 2% annual target," says Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research. "Inflation is showing signs that it's stickier than expected. For example, looking at the major contributors of the month-over-month change in PCE, services remained in positive territory despite the other categories declining."

"We believe inflation will reach 2% eventually," he adds, "but it may mean the economy falls into a recession."

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