Stocks pare losses on Thursday with help of these bright spots

By Joseph Adinolfi

Semiconductor stocks, along with shares of cyclical sectors like energy, materials and industrials, helped limit losses at the index level

Semiconductor stocks, carmakers and a smattering of cyclical and defensive stocks helped propel an afternoon rebound that saw the S&P 500 erase roughly two-thirds of its decline from earlier in the day.

A comeback in beaten-down semiconductor names helped limit losses for both the S&P 500 and Nasdaq Composite.

The PHLX Semiconductor Index SOX was up 2% to trade at 4,645, its best day in nearly three weeks, according to FactSet data. This eased some of the weakness that semis have encountered over the past six weeks, although the index still remains down more than 10% since its March 7 peak.

Semiconductors' gains helped put a floor under the broader information technology sector as shares of Nvidia Corp. (NVDA) rose more than 3.7% to finish at $826.32 a share, FactSet data show. Thursday's advance left Nvidia shares on track for their best week since February, with shares up 8.4%, according to FactSet data.

Market strategists attributed the Thursday rebound in semiconductors to last night's earnings from Facebook parent Meta Platforms Inc. (META).

As Meta shared its results and guidance, the social-media giant revealed plans to spend aggressively to build out its artificial-intelligence capabilities.

These capital expenditures proved to be anathema for Meta's shares, which fell nearly 11% on Thursday, their worst drop since October 2022, according to Dow Jones Market Data.

However, the company's plans proved to be exactly the vote of confidence that recently-struggling semiconductor stocks needed following weak guidance from two industry stalwarts earlier this month, according to Art Hogan, chief market strategist at B.Riley Wealth.

"The semiconductors had been under a great deal of pressure after both Taiwan Semiconductor and ASML reported good earnings but conservative guidance," Hogan said during a phone interview with MarketWatch.

"The group is catching a bit of a bid after Meta reported last night, and we'll likely hear more about that from Microsoft as well," Hogan said during a phone interview with MarketWatch.

Meanwhile, shares of Loar Holdings Inc. (LOAR) and Rubrik Inc. (RBRK) soared in their market debuts on Thursday, helping to improve the overall tone of Thursday's chaotic trade.

What started as a few isolated bright spots expanded as investors took a beat to parse Thursday's initial estimate of first-quarter GDP growth. By the time Wall Street closed, five of the S&P 500's 11 sectors were trading higher, after all 11 had traded in the red Thursday morning.

One of the S&P 500's sectors - defensive-oriented utilities - even closed at its highest level since July 31, 2023, according to Dow Jones Market Data.

Meanwhile, materials, energy and industrial stocks emerged as the top-performing S&P 500 sectors on Thursday, further bolstering the notion that the bull market that began in October 2022 was broadening out to include more cyclical names, even on days where the overall trend in the market was lower.

Kevin Gordon, senior equity strategist at Schwab, said cyclicals' outperformance on Thursday was partly a reflection of the fact that the details from the first-quarter GDP report, released earlier, were stronger than the headline number let on.

"If you look at the GDP data, the guts of it weren't bad at all, it was really the drag from net exports and inventories that weighed on the overall number," Gordon said during an interview with MarketWatch.

Gains for utilities stocks were likely driven by buyers looking for bargains, as well as investors seeking safety in more defensively-oriented stocks, Gordon said.

Still, major stock indexes finished lower as investors appeared more concerned with a reading on quarterly core inflation that surpassed economists' expectations, pushing investors to further dial back their expectations for the number of Federal Reserve interest-rate hikes in 2024.

Looking deeper beneath the hood, a more than 13% jump in shares of gold miner Newmont Corporation (NEM) helped boost materials stocks.

Industrials received a boost from transportation stocks, which were up 1.4%, reversing some of the losses from its worst day since October on Wednesday.

Shares of manufacturers of automobile and components were up 3.9%, making them the second-best performing industry behind semiconductors, according to FactSet data. They benefited from a nearly 5% jump in shares of Tesla Inc. (TSLA), as well as robust gains from Ford Motor Co. (F) and General Motors Co. (GM) following stronger-than-expected earnings from all three carmakers released earlier this week.

Stocks listed in the S&P 500 are separated into 11 sectors and 24 industry groups.

After a five-month advance that ranked as one of the most rapid in markets history, U.S. equity gauges hit a speed bump in April, with the S&P 500 SPX down nearly 4% through Thursday's close, according to Dow Jones Market Data.

April's slide resumed on Thursday, even as all three of the main U.S. equity gauges remained higher on the week following three days of gains for the S&P 500 and Nasdaq Composite, according to FactSet data.

U.S. stocks had substantially pared their losses by the time Wall Street closed on Thursday, with the S&P 500 down 23.21 points, or 0.5%, at 5,048, while the Nasdaq Composite COMP was off by 100.99 points, or 0.6%, at 15,611, according to FactSet data.

The Dow Jones Industrial Average DJIA was off by 375.12 points, or 1%, at 38,085, after falling nearly 700 points earlier.

Now, investors are turning their attention to shares of Google parent Alphabet Inc. (GOOG) and Microsoft Corp. (MSFT) Both stocks traded higher after the bell after releasing their earnings.

-Joseph Adinolfi

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04-25-24 1639ET

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