Jul 27, 2018

Why stocks went down when GDP went up

Stocks finished down on Friday despite the strongest quarterly GDP report in nearly four years, with the Dow Jones Industrial Average losing 76 points and the tech-heavy Nasdaq off 114 points.

Data: Money.net; Chart: Axios Visuals

There is rarely a single reason for why markets rise or fall, but here are some explanations for today's dichotomy:

Tech troubles: Intel and Twitter both came out with troubling earnings reports, dragging down a tech sector that has been largely leading the way in 2018. Apple, Google and Microsoft all finished lower, although Amazon climbed.

  • Nasdaq's 1.46% loss was its worst in over a month, while the tech component of the S&P 500 fell 2% (overall index was down -0.7%).

Rate rise: The GDP report virtually guarantees that the Fed will continue to slowly raise interest rates. This was already assumed, but perhaps some holdouts only got the message today.

  • We've previously seen stocks fall after strong monthly jobs reports, for similar reasons.

Meh factor: There is widespread skepticism that 4.1% GDP can be maintained next quarter, let alone in 2019. Particularly given that the figure may, in part, have been inflated by exporters trying to beat tariff deadlines. Add in that most economists had been predicting a very strong Q2 number, and there really wasn't the sort of upside optimism that sparks buying.

Go deeper

The 2010s: When all companies became tech companies

Tech companies dominated the 2010s, with the FANG stocks (Facebook, Amazon, Netflix, Google) helping the S&P 500 return more than 350% over the course of the decade. The index would have done even better had it included Domino's Pizza, which is also a tech company.

Why it matters: These companies don't look like the tech firms of earlier decades. They don't manufacture computer hardware; neither do they sell software. They don't even make high-tech planes, like Boeing, or high-tech cars, like Tesla.

Go deeperArrowJan 2, 2020

S&P earnings expected to grow in Q4 for the first time since 2018

Reproduced from FactSet; Chart: Axios Visuals

Given the way S&P 500 earnings have beaten estimates over the past few years it is likely the index will report earnings growth in the fourth quarter — the first and only quarter of growth last year.

Between the lines: John Butters, FactSet's senior earnings analyst, said in a note that on average nearly three-quarters of S&P 500 companies' actual earnings have exceeded estimates by about 5%.

Go deeperArrowJan 6, 2020

Amazon and Big Tech can't escape climate pressure

Illustration: Sarah Grillo/Axios

2020's first battle between Big Tech and climate activists is already here, and it won't be the last.

Driving the news: Amazon Employees for Climate Justice (AECJ) yesterday alleged management is trying to prevent employees from continuing to publicly criticize corporate policies.

Go deeperArrowJan 3, 2020