Tech stocks jump after blowout earnings, but Dow struggles

The biggest tech companies and market leaders — Facebook, Amazon and Apple — soared on Friday after reporting better-than-expected quarterly results. But the Dow Jones Industrial Average struggled to stay in the green.

The 30-stock average fell about 20 points as Caterpillar and Chevron led the declines. The S&P 500 gained 0.2%, while the tech-heavy Nasdaq Composite jumped about 0.8%.

A few negative headlines capped the gains in the broader market despite the stellar results from major tech companies:

  • Emergency unemployment benefits are set to expire Friday and Congress and the White House still seem far apart on an agreement.
  • Dow-component Chevron fell more than 4% after the oil giant reported an $8.3 billion loss in the second quarter as the pandemic “significantly reduced demand.”
  • Stocks linked to an economic recovery like banks and retailers were lower as investors assessed the biggest quarterly gross domestic product contraction on record and persistently weak job growth. JPMorgan and Home Depot were both in the red.
  • There could be a so-called sell-the-news effect now that technology companies have delivered strong results to back up their market-leading run.

“Blowout big tech earnings, a better than expected China PMI and strong German retail sales are doing little to offset the disappointment surrounding fiscal package 4 negotiations,” Dennis DeBusschere, macro research analyst with Evercore ISI, said in a note.

Apple reported a blowout quarter, sending shares up more than 6%. The company said its overall sales expanded by 11%, and Apple also announced a 4-for-1 stock split. 

Amazon, meanwhile, traded 5% higher as the company saw its sales skyrocket during the coronavirus pandemic. Facebook shares rallied more than 7% as the social media giant posted revenue growth of 11% even amid the coronavirus pandemic slowdown. The company also issued stronger-than-expected sales guidance for the current quarter. 

Google-parent Alphabet also posted better-than-expected earnings, but the company’s overall revenue declined for the first time in its history. Revenue for Google Cloud were also just below analyst expectations. Alphabet shares fell more than 4%.

“Obviously, no one was doubting any of those companies so the fact they all exceeded expectations isn’t exactly shocking,” Adam Crisafulli of Vital Knowledge, said in a note Friday. “Investors are now trying to smooth out some of the numbers (i.e. how much of the monster upside was a function of extremely conservative guidance along w/an unsustainable spike in revenue and decline in expenses?)”

Collectively the four stocks were set to add about $200 billion to their total market cap, bringing it to more than $5 trillion combined. 

Big Tech has been the stalwart on Wall Street this year. Amazon and Apple are up 65% and 31%, respectively, in 2020. Facebook and Alphabet have risen more than 14% over that time period. 

Investors continued to flock to safe-haven assets amid the uncertainty about the economic recovery. Gold futures spiked to an all-time high of $2,005.4 an ounce on Friday, crossing the $2,000 mark for the first time.

Still, the major U.S. equity averages are looking to wrap up the month of July with solid gains. The S&P 500 has gained 4.7% this month through Thursday’s close, on track for its fourth consecutive positive month. The Dow and the Nasdaq Composite have gained 1.9% and 5.2%, respectively, month to date.

— CNBC’s Patti Domm contributed to this report.

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