(Reuters) – The main Wall Street indices rose on Thursday, as a reversal of declines in mega-cap technology stocks helped investors look at previous data showing another sharp contraction in the U.S. economy.
Heavyweights including Microsoft Corp, Facebook Inc, Netflix Inc and Alphabet Inc rose earlier in the day, supporting the high-tech Nasdaq index.
With the quarterly reporting season in full swing, market participants began to question whether companies like Apple Inc, Facebook and Tesla Inc could justify their premium ratings.
“Investors are digesting the profits that came out overnight and this morning, and taking a look at the fundamentals of what is going on in specific companies, as well as any perspective that can be provided to try to justify the valuations,” said Brian Vendig, executive -manager at MJP Wealth Advisors in Westport, Connecticut.
Apple reported sales and profit for the Christmas quarter that exceeded Wall Street expectations, however, the iPhone maker’s shares fell 1.9%.
Facebook rose 2.3% after exceeding quarterly revenue estimates, but warned that Apple’s impending privacy changes could hurt revenue by interfering with ad targeting.
Tesla fell 4.7% after the electric car maker reported disappointing results in the fourth quarter and failed to provide a clear target for 2021 vehicle deliveries.
The data showed that the U.S. economy contracted at its sharpest pace since World War II in 2020, as COVID-19 ravaged service companies like restaurants and airlines.
A separate report showed that an additional 847,000 people probably filed for unemployment insurance claims last week, reinforcing the view of a persistent fragility of the labor market.
“This is a market that thinks about how the economy can look in six months … and I think this is a time when short-term numbers are of little importance to most investors,” said Rick Meckler, partner from Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
Concerns about the slowdown in the economic recovery due to increased coronavirus cases, increased stock market valuations and uneven distribution of vaccine launches have kept investors nervous about a downturn and increased short-term volatility.
American Airlines Group Inc rose 26.1%, making it the most recent stock to lead big gains for a series of actions promoted by social media, amplifying the battle between small traders and the main Wall Street institutions that shook the markets of United States and Europe shares.
At 9:52 am ET, the Dow Jones Industrial Average rose 334.78 points, or 1.10%, at 30,637.95, the S&P 500 rose 39.24 points, or 1.05%, at 3,790.01, and the Nasdaq Composite rose 93.42 points, or 0.70%, to 13,364.01.
Comcast Corp increased 3.5% after reporting better-than-expected revenue in the fourth quarter, as broadband demand continued to make up for the weakness related to the pandemic in its theme parks and movie entertainment businesses.
Early issues exceeded the decliners by 3.61 to 1 on the NYSE and 2.39 to 1 on the Nasdaq.
The S&P index recorded eight new 52-week highs and no new lows, while the Nasdaq recorded 47 new highs and three new lows.
Reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Shounak Dasgupta edition