What’s News in Markets: Capital One Gains, Consumer Conglomerate Woes, Alphabet Earnings Shine
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What are the biggest stock moves of the week?
The relief rally started with optimism for a trade deal after Treasury Secretary Scott Besant said on Tuesday that he expects the trade war with China to de-escalate, even though Beijing has said it isn't in negotiations with Washington. And, of course, some dovish comments from Fed officials on Thursday boosted hopes for lower interest rates. That certainly didn't hurt. And it was after hours Thursday that we also got a strong earnings report from Alphabet. More on that in a bit. And though stocks traded mixed during Friday's session, all three major indexes ended higher. That is a four-day winning streak for those of you playing along at home. On a weekly basis, the Dow rose 2.5%, the S&P 500 gained 4.6%, and the Nasdaq jumped 6.7%.
Early in the week, Capital One had some good news sending its shares higher, including the green light on its merger with rival credit card giant Discover. Capital One on Tuesday posted a higher quarterly profit, and the bank said it's prepared to complete the $35 billion acquisition in May, after regulators approved the merger the Friday before. This deal is big for Capital One.
How are consumer conglomerates affected by tariffs?
It expands its credit card business, and it gives the bank a card network to compete with Visa and MasterCard. Both Capital One and Discover are card issuers. They give out and manage credit cards. But only Discover is a network, the ones that make the transactions happen between merchants and credit cards. Investors cheered all the news, sending Capital One shares up 1.5% on Monday and 3.1% on Tuesday. And for the week, the stock gained more than 12%.
Earnings season is in full swing, and one big sector to watch during the week was consumer products makers, as a bunch of them announced outlook cuts that gave us a window into how the trade war is affecting the makers of everything from shampoo to detergent to toilet paper. Some names for you, Kimberly-Clark, Procter & Gamble, and Colgate-Palmolive. Kimberly-Clark, Kleenex tissues, Huggies diapers, on Tuesday said it expects $300 million in new costs this year related to the trade war. And Procter & Gamble, which makes Tide detergent, for one, on Thursday posted lower sales and said it would do whatever it could, including possibly changing product formulations, to mitigate the effects of tariffs.
On Friday, Colgate-Palmolive bucked the trend a bit by posting better-than-expected results, but executives said consumers worried about the economy have been buying less. So how'd the stocks do this week? Well, Procter & Gamble ended down 5%, Kimberly-Clark fell 7.9%, and Colgate-Palmolive dropped 1.7%.
Now back to Alphabet, parent company of Google and one of the first big tech companies to report its quarterly results this season. And in the midst of all the economic turbulence, its latest earnings managed to hold up. Alphabet's operating income beat Wall Street's expectations, and it's still spending hand over fist to invest in AI. In the first quarter, capital expenditures reached a record $17.2 billion. Google's all-important advertising revenue rose 8% on the year, But this is something to watch as the rest of the year unfolds. Because while most of Google's business isn't directly affected by all the tariffs, the ad sector is vulnerable in an economic downturn. And it makes sense, right?
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