Investors were likely on pins and needles heading into Thursday's session after markets sold off sharply Wednesday. A slow start turned into a mixed finish, with blue chip stocks outperforming thanks to a positive earnings reaction for International Business Machines (IBM).
The first reading on second-quarter gross domestic product (GDP) showed the U.S. economy grew at an annual rate of 2.8%, far exceeding Q1's 1.8% rate and economists' expectations for 2% growth.
True, this is the first reading of Q2 GDP and there could be revisions down the road. But Matt Peron, global head of solutions at Janus Henderson Investors, says the data "does lend support to the soft-landing narrative."
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Peron adds that the report should also "provide some relief to stressed markets by showing that the second quarter was generally solid. However, we note that the economy does seem to be downshifting and that may cause continued volatility in the coming months."
Durable goods fall for the first time in five months
Elsewhere on the economic calendar, data from the Census Bureau showed durable goods orders dropped by 6.6% from May to June. As Wells Fargo economists Shannon Seery Grein and Tim Quinlan note, this is the worst durable goods reading since the start of the pandemic and the first decline in five months.
The economists add that while the sharp decline in new orders "overstates weakness in capital expenditures demand," they remain cautious considering companies are facing higher costs to finance the purchase of new equipment. Uncertainty surrounding the outcome of this fall's presidential election could also weigh on equipment demand in the near term, the economists say.
Buffett sells 52 million Bank of America shares
In single-stock news, Bank of America (BAC, -1.2%) made headlines after regulatory filings revealed Warren Buffett's Berkshire Hathaway (BRK.B, +0.1%) sold more than 52 million shares of the financial stock over a six-day period beginning July 17.
Buffett first gained exposure to BAC back in 2011 when he invested $5 billion to boost the big bank's finances following the Great Recession. He exercised warrants in 2017 and at the end of Q1 2024, Bank of America was the second-largest holding in the Berkshire Hathaway equity portfolio.
Given BAC was up 31% for the year to date through July 16, some of this selling may be the result of profit-taking. Or, along the same lines as why Buffett sold Apple shares earlier this year, it could also be for tax reasons.
IBM, Ford make notable post-earnings moves
The real action Thursday was on the earnings calendar. Shares of Chipotle Mexican Grill (CMG), for one, fell 1.9% even after the burrito chain beat analysts' top- and bottom-line expectations for its second quarter. The fast-casual restaurant chain's strong financial performance was driven by new store openings and an 11.1% increase in comparable-restaurant sales.
CFRA Research analyst Siye Desta downgraded CMG stock to Hold from Buy after earnings, saying the company's commitment to generous portions could negatively impact margins.
Ford Motor (F) stock was another post-earnings loser, plunging 18.4% for its biggest one-day drop since 2008 after the automaker fell short of earnings expectations for its second quarter. Despite the earnings miss, the company raised its full-year outlook for free cash flow.
On the plus side of the ledger, IBM stock rose 4.3% after the technology giant beat top- and bottom-line expectations for its second quarter and hiked its 2024 free cash flow forecast.
These increased free cash flow estimates are important for investors because companies will often allocate some of this available money to spend toward shareholder-friendly initiatives such as stock buybacks and dividends.
IBM's post-earnings pop helped the Dow Jones Industrial Average outperform, with the 30-stock index finishing up 0.2% to 39,935. The S&P 500 slipped 0.5% to 5,399 and the Nasdaq Composite added 0.9% to 17,181.
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