Dow Gains 500 Points Thanks To Big Tech’s $320 Billion Rally

Topline

Major stock indexes notched their best day in months Thursday thanks to mid-earnings season optimism fueled by a blockbuster report from Facebook parent Meta—though the gains were once again largely driven by a handful of mega-cap stocks.

Tech stocks—and perhaps some corks—popped Thursday.

Xinhua News Agency via Getty Images

Key Facts

The Dow Jones Industrial Average jumped 506 points, or 1.5%, to 33,807 points, while the S&P 500 and tech-heavy Nasdaq rose 1.9% and 2.4%, respectively.

That’s the Dow and S&P’s largest gain since January 6 and the Nasdaq’s best day since February 2.

Spearheading the rally was Meta, which gained 14% after reporting strong financial results, picking up roughly $75 billion in market value.

Alphabet (up 4%), Amazon (5%), Apple, (3%), Microsoft (3%) and Nvidia (1%) each staged rallies fueled by the Facebook parent’s hot earnings report.

Those six stocks—the world’s six largest tech companies and eight of the world’s ten biggest companies—added nearly $320 billion in market capitalization Thursday.

Crucial Quote

“Mega-cap tech crushed earnings,” Oanda analyst Ed Moya wrote Thursday. Google parent Alphabet, Meta and Microsoft each beat analyst forecasts for profit and sales during the first quarter of 2023.

Key Background

The ten largest stocks in the S&P account for roughly 30% of the index’s total weight, according to JPMorgan analysts led by Dubravko Lakos-Brjas, the 96th percentile since 1980. Apple and Microsoft, the world’s largest companies by market cap, account for more than 13% of the index’s total weight, a record high. “Narrow leadership, in general, reflects a less healthy rally than one with broader participation,” LPL Financial analyst Jeffrey Buchbinder said in a note to clients earlier this month.

Contra

Investor optimism followed the release of a report from the Bureau of Economic Analysis revealing that the U.S. economy grew far less than expected during the first quarter, with gross domestic product growing just 1.1%. A “recession [is] incoming,” Pantheon Macro chief economist Ian Shepherdson warned following the GDP update.

What To Watch For

Amazon reports earnings after the bell Thursday. Analysts expect the company to post $124.6 billion in sales and $0.21 earnings per share, according to FactSet. Apple and Nvidia will report next month.