Big tech earnings help US markets recover Liberation Day losses

Despite clear signs of mounting pressure on the economy and companies, markets seem remarkably sanguine and have more or less completed their recovery from the dramatic tariff-driven sell-off at the start of last month, helped by largely impressive hotly watched big tech earnings.

Although ‘Liberation Day’ wasn't until the start of April, US first-quarter GDP (gross domestic product) shrank by 0.3% as consumers cut back and companies tried to front-run tariffs causing a surge in imports.

This is only the second quarterly fall since the pandemic and the first in three years, and while corporate activity in the second quarter may be less skewed, the slowdown in personal spending, a direct response to the lowest consumer confidence reading in five years, is more worrisome.

At the same time, major US corporations like General Motors, Kraft Heinz, Starbucks and UPS have either cut their full-year guidance or withdrawn it altogether due to lack of sales and earnings visibility.

Economists expect the White House’s aggressive trade policy to result in a wave of job losses, creating a drag on domestic demand, and although employment is typically a lagging indicator this week’s jobless claims were markedly higher than expected, meaning all eyes are on April’s non-farm payroll data due later today.

Big tech earnings

If we’re in for leaner times as recession risks rise, it’s quarters like this that will remind investors not to bet against big tech. We’ve now had latest quarterlies from Apple, Amazon, Meta Platforms and Microsoft, led by Alphabet last week, and they are leading US markets higher with vigour.

Both the S&P 500 and Nasdaq have all but wiped out those Liberation Day losses thanks to earnings beats, largely confident outlooks and firm reminders that these companies are built to prosper in any kind of market.

Investors were hoping for reaffirmed optimism that the AI wheels are not coming off – check. That huge AI investment was paying off – check. That talk of possible recession hadn’t blown a hole in ad incomes – check. And that Trump’s tariffs policies are not ripping chunks out of revenue streams – er, check ish, if you discount a $900 million tariffs headwind facing Apple and Amazon's own wariness.

The battle has not been won, and consumer-exposed tech names like Apple and Amazon face growing pressure from trade tensions and shifting spending patterns, and if recession does emerge, there will be impacts on ad spend, but the message is clear - investors ditch leading big tech stocks at their peril.

Hims & Hers Health

Telehealth platform provider Hims & Hers saw its shares jump as much as 25% on Tuesday (29 April) after announcing a collaboration with Danish drug maker Novo Nordisk to give US consumers direct access to its weight loss treatment Wegovy.

Patients can bundle all dose strengths of the obesity drug with a Hims & Hers membership for $599 per month.

The deal allows the company to continue selling Wegovy’s active ingredient semaglutide in branded form after the US regulator stopped Hims making cheap copycat versions which it was allowed to do when the drug was in short supply.

Founder and chief executive Andrew Dudum commented: ‘We’re excited to work with Novo Nordisk, a company known for breakthrough innovation in clinical medicine and a strong portfolio of medications.’

The two firms plan to deepen the relationship by combining Novo’s innovative platform with Hims & Hers ability to deliver access to quality care at scale more affordably.

Hims shares are up 169% over the last year and 40% year to date.

McDonald’s

Fast-food giant McDonald’s failed to impress investors on Thursday (1 May), with its shares falling at the market open as the company reported its largest US same-store sales decline since the second quarter of 2020 during the height of Covid-era lockdowns.

The firm blamed bad weather and cautious consumers for the 3.6% fall in US first-quarter same-store sales and revenue shortfall.

Sales came in at $5.96 billion against a consensus of $6.12 billion as cash-strapped diners stayed away from the firm's restaurants, with global like-for-likes - or sales at restaurants in operation for more than one year - down 1% on the previous year.

‘During the first quarter, geopolitical tensions added to the economic uncertainty and dampened consumer sentiment more than we expected,’ McDonald’s chief executive Chris Kempczinski told analysts.

Bernstein analyst Danilo Gargiulo said: ‘Overall the results did not surprise us. We have been flagging the consumer weakness that disproportionately impacts the lower income consumers - McDonald’s core customer cohorts.’