U.S. stocks rallied for four straight days to finish the week higher. It was the longest winning streak since January, led by big tech stocks on better earnings. The easing of negative trade headlines and lower bond yields also aided investor enthusiasm for equities.
The S&P 500 index ended April 25 at 5,525, up by 4.59 percent for the week. The Dow Jones Industrial Average rose 2.48 percent to close at 40,113. The Nasdaq climbed 6.73 percent, ending the week at 17,382, while the Russell 2000 closed at 1,957, up by 4.09 percent.
Among the gainers were the beaten-down Big Tech shares, which were led higher by bargain hunting and better-than-expected earnings from Texas Instruments and Alphabet, whose shares rose by 9.71 percent and 6.84 percent, respectively.
Texas Instruments, the designer and manufacturer of analog and embedded semiconductors for industrial, automotive, personal electronics, communications equipment, and enterprise systems, beat earnings and revenue estimates and provided rosy guidance on strong demand for industrial and automotive chips.
Alphabet, Google’s parent company, beat earnings estimates by generating substantial advertising revenue, raised its dividends, and authorized $70 billion in share buybacks.
Elsewhere in the tech sector, Tesla shook off a disappointing earnings report to gain 18 percent on news that the U.S. Department of Transportation is easing some self-driving rules, which could speed up the deployment of self-driving cars.
The electric vehicle pioneer has been betting on that move to keep the buzz alive for the brand.
Another week-long gainer was Nvidia, which rallied alongside the rest of the sector and reflecting hopes of easing trade tensions between the United States and China.
Among the week’s losers were consumer stocks, led by Procter & Gamble and Pepsi. Both companies reported sizable losses, reflecting consumers’ growing anxiety about the state of the economy and the intensification of competition.
Another loser was T-Mobile due to slow phone subscriber growth, as competition from Verizon and AT&T heated up.
The easing of negative headlines on trade tensions and some positive comments from Fed officials aided the rally in equities. This helped lower bond yields, with the 10-year Treasury bond yield ending the week at 4.24 percent, down from 4.40 percent at the start of the week.
Treasury bond yields are the discounting factor in conventional equity valuation models, such as the Discounted Cash Flow Model. Lower bond yields raise equity valuations, making equities more appealing to investors.
The decline in bond yields occurred despite the Fed’s Beige Book, released on April 23, providing a gloomy outlook for inflation.
“IT services prices rose at a slight pace over the quarter, and hotel room rates in the Greater Boston area increased modestly on a year-over-year basis,” it reads.
“Retail prices were roughly flat in recent months, including those of autos. On a year-over-year basis, wholesale seafood prices declined moderately, while prices of certain metals imported from China increased sharply.”
The decline in bond yields and the rally in equities, despite news of elevated inflation, could indicate that both the credit and equity markets have already priced in the worst-case scenario of any shortfall from Washington’s trade policies, and that the correction might be over.
Gaurav Mallik, chief investment officer of Pallas Capital Advisors, which has $3 billion in assets and is based in Braintree, Massachusetts, believes the stock market is range-bound right now, driven by headlines from Washington.
“We have been seeing deep down days in stocks reversed the next day by big up days, leading to a sideways market,” he told The Epoch Times.
“A sideways market is common at times in investing, and it can take a few months for corrections to end, and we still believe that this is a correction given the speed of the declines.”
However, he said that the volatility of the past few weeks provides a good indication of the danger of paying too much attention to day-to-day stock moves.
“Reducing stock exposure on a down day for fear of further declines risks missing out on the market’s eventual rebound, which in some cases occurs 24 hours after the declines,” he said.
Mallik advises investors to stick to high-quality, cash-generating sectors, such as utilities and health care.
“Many of the companies in these sectors have resilient business models, growing dividends, and lower volatility,” he said.
“Even with the uncertainty from tariffs, the AI story is still intact, and utilities play a vital role in providing the energy needed to build and power AI.”
