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S&P 500, Nasdaq post record closing highs as GDP surges ahead of expectations

The S&P 500 and Nasdaq closed at record highs for a second time this week amid a stronger-than-expected reading of U.S. first-quarter gross domestic product and the results of a deluge of corporate quarterly reports.

The S&P 500 (^GSPC) ticked up 0.47%, or 13.71 points, as of market close, with the Energy sector underperforming as domestic oil prices (CL=F) settled lower by 2.9%. The S&P 500 closed at 2,939.88, surpassing a previous closing high hit on April 23.

The Nasdaq (^IXIC) on Friday edged up 0.34%, or 27.72 points, remaining in the green even as Intel (INTC) shares slumped 9% after the chip company guided toward a drop in revenue this year in results reported Thursday afternoon. The index posted a weekly advance of 1.5%, as tech earnings throughout the week largely came in ahead of expectations, and ended Friday’s session at a record closing high of 8,146.4.

The Dow (^DJI) rose 0.31%, or 81.25 points, on Friday. However, the industrials-heavy index fell slightly over the past week as component company 3M (MMM) posted a 12.8% weekly decline.

Investors on Friday turned their attention to the initial print on first-quarter gross domestic product, which came in sharply better-than-expected. The U.S. economy grew at a 3.2% annualized pace in the first quarter, surging ahead of expectations for 2.3% growth, according to data compiled by Bloomberg. In the fourth quarter, the economy grew at a 2.2% rate.

Stocks and the U.S. dollar (DX-Y.NYB) were range-bound for much of Friday’s session amid the better-than-expected GDP report as of Friday afternoon, as some analysts pointed out that the solid headline GDP reading belied a series of positive economic inputs likely to be reversed in quarters to come.

“Growth was driven in the first quarter by an increase in inventories and a strong reading on net exports, two factors which could be reversed in the second quarter,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, wrote in an email. Net exports grew by 3.7% on an annualized basis, while imports contracted by 3.7%, the BEA reported Friday, and inventory-building accelerated.

Personal consumption, which comprises the largest portion of U.S. economic activity, came in ahead of expectations at 1.2%, but slowed from a 2.5% advance in the fourth quarter. Core personal consumption expenditures – the Federal Reserve’s preferred gauge for underlying inflation – grew a slower-than-expected 1.3%, versus 1.4% anticipated. This is the latest reading pointing to persistently lower-than-target inflation, a trend which has baffled Federal Reserve officials amid low unemployment rates.

“While the strength in growth – and labor market data and financial conditions — points to no need for Fed easing, the move in core inflation is in the wrong direction from the perspective of Fed officials, although we suspect much of the slowing is due to developments that officials should, and probably will, discount, including volatility in imputed financial services components and seasonal adjustment problems relating to new source data for apparel in the CPI,” Jim O’Sullivan, chief U.S. economist for High Frequency Economics, wrote in a note. “Net-net, we believe the Fed is firmly on hold.”

Elsewhere, investors also considered Uber’s forthcoming initial public offering – poised to be the largest U.S. IPO this year – after the no. 1 ride-hailing company released its prospectus Friday. Uber plans to offer 180 million shares at between $44 and $50 each, raising up to $9 billion in the IPO and giving it a market valuation of around $90 billion on a fully diluted basis, based on shares outstanding after the offering.

The per-share range, however, represents a reduction from a previously reported band of between $48 to $55 per share, and comes in the wake of peer ride-share company Lyft’s disappointing market debut. Both companies have posted deep losses in the years leading up to their public debuts, forcing investors to place bets on prospects of future growth in the absence of a track record of profitability.

On Friday, Slack also published a prospectus for its own initial public offering, which it intends to carry out by way of direct listing. It too posted a loss, totaling $140.7 million in its most recent fiscal year, versus a loss of $140.1 million for the year prior. Revenues, however, were up 82% to $400.6 million for the year ending January 31.

Market participants have closely watched this year’s set of IPOs – which also saw the public debuts of Zoom (ZM) and Pinterest (PINS) – for signs of the strength of the stock market as a whole.

STOCKS

Amazon (AMZN) posted record-breaking earnings of $7.09 per share, surging ahead of estimates for earnings of $4.72 per share. Sales overall and in the closely watched AWS cloud computing segment were in-line with expectations, coming in at $59.7 billion and $7.7 billion, respectively. Growth in the segment that includes Amazon’s advertising business, however, slowed to 36% year-over-year, falling from the 132% pace it saw a year ago. The company said it plans to invest $800 million in the second quarter to speed its current two-day delivery for Prime members to just one day.

Starbucks (SBUX) posted earnings that beat Wall Street expectations amid strong sales in the U.S. and China during its fiscal second quarter. Earnings of 60 cents per share on an adjusted basis exceeded expectations by 4 cents, while revenues of $6.3 billion were roughly in-line with expectations. Same-store sales growth – a closely watched metric in the restaurant business – came in at 3%, beating expectations of 2.9%. This was driven by 4% same-store sales growth in the U.S. and 3% growth in China. The company raised its guidance to see 2019 earnings per share in a range of $2.40 to $2.44, up from $2.32 to $2.37 per share previously.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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