Disney may give stocks reason to cheer

Investors applauded mediocre Apple earnings and softness in the latest jobs report, and the good vibes look set to continue.

May 5, 2024 - 14:30

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Sometimes bad news is good news. It certainly seemed that way on Friday.

The Labor Department reported job growth in April waned from a big jump reported in March.

Investors pushed shares of Apple (AAPL) up 6% on Friday and 8.3% on the week, thrilled that the tech giant's second- quarter earnings report, released late Thursday, wasn't a bust.

Oil prices moved lower. And a key interest rate drifted lower all week.

A perfect recipe for a rally. And stocks did rally, not just Apple. Tesla (TSLA) was up 7.7% on the week. Amazon.com (AMZN) added 3.7%. Facebook parent Meta Platforms (META) rose nearly 2%.

The Standard & Poor's 500 Index was up 0.6% for the week. The Nasdaq rose 1.4%, on top of a 4.2% gain the week before. The Dow Jones Industrial Average climbed 1.1%, up for a third straight week.

For many, the end-of-week rebound proved a welcome surprise. Fact was, April ended with a thud, especially Tuesday when the major averages all fell about 2% on earnings and inflation worries.

This un-gloom may be setting stocks up for a pleasant May.

The S&P 500's gain brought the index just about back up to its 50-day moving average. The Nasdaq is now above its 50-day moving average.

Moving above the 50-day average is usually a signal of investor confidence.

Federal Reserve Chairman Jerome Powell testifies in Washington in March.
Tom Williams/Getty Images

Powell sparks a rally

The immediate catalyst was the Federal Reserve Chairman Jerome Powell's declaration at his Wednesday news conference, "It is unlikely the next move will be a hike."

Stocks rallied immediately on the statement, then stalled. But a new rally erupted Thursday and continued into Friday.

Including Tesla and Apple, six of the seven Magnificent stocks showed gains on the week, although Microsoft (MSFT) was up just 0.1%. Chip giant Nvidia (NVDA) added 1.2%.

The loser was Google-parent Alphabet (GOOG,) down 2.7%.

The Mag 7 stocks include most of the richest companies in the world, including Apple, Amazon.com, Alphabet, Meta, Microsoft, Nvidia and Tesla.

More Wall Street Analysts:

What will Neel Kashkari say?

The week ahead does not feature any truly major economic reports. What may grab headlines will be speeches from various Fed officials about the prospect of interest-rate cuts, inflation and the health of the U.S. economy.

The most important may come Tuesday from Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis.

On April 4, Kashkari predicted two rate cuts this year at most and maybe none at all because on intensifying inflation pressures. The Dow duly fell 530 points. The S&P 500 and Nasdaq also slumped.

The Dow went on to a 5% loss in April, with the S&P 500 down 4.2% and the Nasdaq off 4.3%.

Interest rates, oil fall

Adding to the end-of-week investor cheer, interest rates mostly moved lower. The 10-year Treasury yield fell to 4.52% on Friday from 4.58% a day earlier and a peak of 4.72% on April 26.

That helped mortgage rates move lower, with a 30-year mortgage fetching around 7.2%, down from 7.5% a week earlier.

But that level is still higher than 6.6%, seen in some markets in February.

Crude oil closed at $78.11 on Friday, its third day in a row below $80. Crude had been trading above $80 since early March.

The national average price of gasoline was $3.667 per gallon on Saturday, up slightly so far in May. Gasoline was up 3.45% in April, but the bump up was modest compared with gains of more than 6% in both March and February.

Disney, Uber, Toyota, Rivian earnings ahead

The big focus will be earnings as the first-quarter earnings season sees one of its biggest weeks.

The earnings season has been strong. The percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages, data firm FactSet reports.

One of the biggest reports of the week will be the second-quarter report from entertainment giant Walt Disney (DIS) , due before Tuesday's open. The expectation is that results will be better than a year ago but not as good as the company's first-quarter results.

The per-share earnings estimate is $1.09 a share, up from 93 cents a year ago.

Disney shares were up 0.8% on the week and are the Dow's top stock this year, up 25.9%.

Disney recently fought off a proxy fight from activist shareholder Nelson Peltz.

The company has been trying to reorganize the company to produce more successful films and TV programming, continue the success of its theme parks and, more importantly, chart a path to profitability for its Disney+ streaming operation.

Uber (UBER) , which reports Wednesday, is expected to report 21 cents a share in earnings, up from 8 cents a year ago as the ride-share business continues to recover from the pandemic.

Japanese auto giant Toyota (TM) also reports on Wednesday. The estimate for its fiscal-fourth quarter is $2.91, down from $3.09. The earnings for its U.S. shares. Company has seen success in the last year with its line of hybrid vehicles in the United States. The vehicles compete favorably against Tesla and other pure EV makers.

Meanwhile, the goal for Rivian Automotive (RIVN) is to show it really can see its way forward. The company went public in November 2021 at $125 and reached $170 soon afterward. It's now at $10 amidst the slump in the pure electric-vehicle market.

Sales are expected to reach $1.2 billion, but the consensus is Rivian will lose $1.17 a share. It did win an $827 million grant from the state of Illinois to expand its one factory. That will help conserve cash and give the company time.

Also coming this week:

Monday