Stocks extend rally despite negative GDP data

US stocks rose sharply Thursday even as new data showed economic activity contracted for the second-straight quarter in Q2.

The benchmark S&P 500 index climbed 1.2%, bringing total gains for the index in the two days immediately following the Federal Reserve’s rate increase to roughly 3.8% — its best rally ever after a hike, going back to data from 1970, Carson Group Chief Market Strategist Ryan Derick points out.

The Dow Jones Industrial Average added 330 points, or 1%, and the tech-heavy Nasdaq Composite advanced by roughly 1.1%.

Earnings from Apple (AAPL) and Amazon (AMZN) are due out after the bell.

Data from the Commerce Department early Thursday showed GDP fell at an annualized rate of 0.9% last quarter, after US economic activity unexpectedly fell 1.6% in Q1. Two straight negative GDP prints meet the unofficial definition of a recession.

Thursday’s moves come after the Federal Reserve delivered an expected interest rate increase of 75 basis points Wednesday afternoon and suggested it may slow the pace of its rate hiking cycle.

The latest GDP report is sure to continue the debate among investors about whether the US economy is in recession, with many market participants judging two-straight quarters of lower growth as meeting the unofficial definition.

White House officials have in recent days, however, been eager to remind the public that recessions are officially called by the NBER, which defines recession as, “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

Elsewhere on the economic data calendar, the weekly report on initial jobless claims showed a slight moderation in first-time filings for unemployment insurance, totaling 256,000 last week after 261,000 filings the prior week.

Still, jobless claims data have been on a modest upward trend over the last several weeks.

On the earnings side, shares of Meta (META) fell roughly 5% after the Facebook parent company reported second-quarter earnings late Wednesday that fell short of analyst estimates. The quarter also marked the social media giant’s first year-over-year revenue decline.

The company also cut its expense forecast again, and on a call with analysts CEO Mark Zuckerberg said, “we seem to have entered an economic downturn that will have a broad impact on the digital advertising business. It’s always hard to predict how deep or how long these cycles will be, but I’d say that the situation seems worse than it did a quarter ago.”

Zuckerberg added: “In this environment, we’re focused on making the long term investments that will position us to be stronger coming out of this downturn — including our work on our discovery engine and Reels, our new ads infrastructure, and the metaverse. We’re also focused on being rigorous about measuring returns and sizing these investments correctly.”

The logos of Amazon, Apple, Facebook and Google are seen in a combination photo from Reuters files. REUTERS/File Photos

On the move:

  • Meta (META) shares fell 5% after the Facebook parent company reported second-quarter late Wednesday that fell short of analyst estimates earnings. The quarter also marked the social media giant’s first year-over-year revenue decline.

  • Comcast (CMCSA) Shares sank roughly 9.1% after the media giant reported broadband subscribers who were flat in its second-quarter earnings results, the first time ever the company failed to add new subscribers.

  • Ford (F) stock rose nearly 6.1% after the Detroit-based carmakers reported Q2 earnings that topped Wall Street expectations on revenue and profit and reaffirmed its guidance, countering some recessionary worries. The auto giant also boosted its stock dividend to 15 cents per share.

  • Teladoc (TDOC) shares shed roughly one fifth of their value after the company reported a loss for the second quarter and a week outlook.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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