U.S. stocks open higher with Dow on track for longest winning streak in 126 years

What’s driving markets

U.S. stocks benefited from the latest batch of strong earnings and economic data on Thursday.

An earnings beat by Meta helped catapult the Nasdaq Composite into the lead among the major U.S. equity indexes, while strong second-quarter GDP helped reassure investors that the Dow would likely extend its winning streak.

Second-quarter GDP rose 2.4% compared with 2% growth during the quarter ended in March, while weekly jobless benefit claims fell to the lowest since February.

See: GDP increases at 2.4% annual pace in the second quarter

“That GDP number is going to drive markets higher today,” said Jason Krupa, vice president of asset management at Lenox Advisors, during a phone interview with MarketWatch.

Shares of the Facebook and Instagram owner climbed more than 8% after markets opened thanks to the company’s better-than-expected earnings, as well as its revenue outlook for the current quarter. The advance by Meta, one of Wall Street’s “Big Seven” stocks, helped drag other members of the elite group higher as well. Shares of Apple Inc.
AAPL,
+1.01%
were up by 1.2%, while Tesla Inc.
TSLA,
+0.71%
rose by 1.7%.

Earnings reports from Comcast Corp.
CMCSA,
+7.74%
and McDonald’s Corp.
MCD,
+1.72%
also arrived ahead of the bell. Both companies beat Wall Street’s expectations for sales. Results from chipmaking giant Intel are due out after the close.

Stronger-than-expected performance by the largest U.S. companies during the second quarter has helped drive stocks higher in July, helping to drive the Dow’s historic winning streak.

To be sure, Wall Street had low expectations heading into the quarter, which is expected to be the third consecutive quarter of negative earnings growth for S&P 500 index companies. So companies’ earnings beats are “a little like dunking on an eight-foot hoop,” Krupa said.

In aggregate, S&P 500 companies are beating Wall Street’s earnings expectations by 7.1% so far, according to the latest data from Refinitiv. That’s compared to a the long-term average of 4.1%.

The biggest news for markets this week arrived on Wednesday, when the Federal Reserve hiked interest rates by a quarter percentage point to a range between 5.25% and 5.5%.

Traders are betting that this could be the final rate hike of a cycle that began in March 2022, when the Fed first lifted interest-rates off the zero-bound, where they had languished since the advent of the COVID-19 pandemic.

Analysts at HSBC say the Fed will keep its policy rate within its current range until the second quarter of 2024, followed by 75 basis points of cuts next year.

In other central banking news, the European Central Bank followed the Fed with an interest-rate hike of its own. It raised its deposit rate by 25 basis points, or a quarter of a percentage point, to 3.75%.

Companies in focus

• Meta Platforms Inc. stock
  META,
  +8.12%
  rose after the Facebook and Instagram parent handily beat Wall Street expectations for its second quarter and ad revenue jumped.

• Chipotle Mexican Grill Inc.
  CMG,
  -9.37%
  tumbled after the fast-casual restaurant chain said inflation hit some of its most popular menu items.

• Mastercard Inc.
  MA,
  -0.65%
  highlighted healthy consumer spending in its earnings report, helping it beat Wall Street’s profit expectations.

• Mattel Inc.
  MAT,
  +5.11%
  late on Wednesday reported second-quarter results that beat estimates, but the toy maker held to its full-year outlook as the “Barbie” movie’s blowout debut weekend clashed with continued muted demand for toys. Shares fell 1.4%.

• eBay Inc.
  EBAY,
  -7.32%
  dipped after the e-commerce site’s earnings outlook came in lower than expected.

• Southwest Airlines
  LUV,
  -8.74%
  tumbled after the airline said its revenue has not yet recovered to prepandemic levels and it’s adjusting its 2024 flight schedule to reflect changes to customer patterns.