Stocks surge on Apple earnings: Short squeeze bolsters US regional banks

Stocks popped on Friday as regional bank shares climbed off their lows and market-darling Apple jumped after posting better-than-expected quarterly earnings.

Stocks rose even as April’s jobs numbers came in hotter than expected. The U.S. economy added 253,000 jobs in April. Wall Street had expected 180,000 new jobs, according to Dow Jones.

The Dow Jones Industrial Average added 546.64 points, or 1.65 per cent, to close at 33,674.38. The S&P 500 climbed 1.85 per cent, ending the day at 4,136.25. The Nasdaq Composite advanced 2.25 per cent and closed at 12,235.41.

Despite Friday’s rally, the Dow and the S&P 500 logged their worst week since March. The 30-stock Dow lost 1.24 per cent, while the S&P 500 dropped 0.8 per cent. The Nasdaq eked out a small weekly gain of 0.07 per cent.

Late Thursday, Apple posted beats on the top and bottom lines for the fiscal second quarter, propelled by iPhone sales. The company also announced a $90 billion share buyback program and increased its dividend by 4 percent. Apple shares gained about 4.7 per cent.

Warren Buffett’s Berkshire Hathaway has started 2023 in a solid fashion, but he has questioned how long that will last with a rare earnings downgrade for 2023. Buffett again lauded Berkshire's investment in Apple as the best in the company’s US$318 billion portfolio. The 92 year old investor expects earnings at the majority of Berkshire’s operations to fall this year as a long-predicted downturn slows economic activity across the US economy.

Berkshire’s more than 90 businesses span across most of the US economy – from railroads to power generation, distribution and sale, car sales, homes, real estate, clothing and footwear, retailing distribution and marketing, roadside services, manufacturing, aviation and its huge insurance businesses. That’s why Berkshire is often seen as a proxy for the health of the US economy.

In the regional banking sector, rebound for regional bank stocks was boosted by a note from JPMorgan, which upgraded Western Alliance, Zions Bancorp and Comerica to overweight. The firm said those three banks appear “substantially mispriced” in part due to short-selling activity.

Shares in regional lenders rose PacWest 81 per cent while Western Alliance rebounded 49 per cent after plummeting due to short sellers aggressively targeting the companies in recent weeks. From Wall Street to Washington, short sellers are now under scrutiny.

The White House press secretary has said the Biden administration is monitoring the short-selling pressures on healthy banks. While a prominent law firm Wachtell Lipton Rosen & Katz has urged the SEC to reinstate a 15-day short-selling ban on banks and to bring back the uptick rule. The American Bankers Association has also asked the regulator to consider using its existing tools to protect banks from short sellers.

On Friday, all sectors closed higher. Energy, Financials, and Technology all finished over 2 per cent higher.

Futures

The SPI futures are pointing to a 0.9 per cent gain.

Currency

One Australian dollar at 7:10 AM is buying 67.51 US cents..

Commodities

Iron ore futures are pointing to a 3.2 per cent fall.

Gold lost 1.50 per cent. Silver lost 1.13 per cent. Copper added 0.52 per cent and oil jumped 4.05 per cent.

Figures around the globe

Across the Atlantic, European markets closed higher. London’s FTSE added 0.98 per cent, Frankfurt gained 1.44 per cent while Paris closed 1.26 per cent higher.

In Asian markets, Tokyo’s Nikkei was closed, Hong Kong’s Hang Seng added 0.50 per cent while China’s Shanghai Composite closed 0.48 per cent lower.

On Friday, the Australian sharemarket closed 0.37 per cent higher at 7220.

Ex-dividends

Naos Ex-50 (ASX:NAC) is paying 1.55 cents fully franked
Naos Smlcap Com (ASX:NSC) is paying 1.25 cents fully franked

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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