Key insights
- The Dow outperformed the Nasdaq due to strong earnings from Caterpillar and concerns about high AI spending from Meta and Microsoft. Caterpillar's positive outlook boosted confidence in the broader economy, while increased capital expenditure guidance from tech giants raised concerns about return on investment. Overall, the market is split between old economy strength and tech sector spending worries.
The stock market was split in half on Thursday, with strong earnings from old economy leader Caterpillar boosting the Dow Jones Industrial Average, while concerns about overly ambitious artificial intelligence spending knocked down Meta and the Nasdaq Composite.
The blue-chip Dow added 730 points, or 1.5%. The S&P 500 was up 0.5%, while the tech-heavy Nasdaq rose 0.2%.
Caterpillar shares popped 10% on Thursday after the company better-than-expected quarterly figures, boosting the Dow. The industrial name, which is viewed as a bellwether for the global economy, also upped its annual revenue outlook.
The report offers a glimmer of hope for the U.S. economy, which saw disappointing growth in the first quarter. On Thursday, the Commerce Department reported that gross domestic product rose at a 2% annualized pace in the period. While that was an increase from 0.5% in the fourth quarter of 2025, it was below the 2.2% estimate.
Conversely, Meta Platforms and Microsoft lost 9% and 5%, respectively, weighing on the S&P 500 and Nasdaq, which are more tilted toward technology-related stocks. Meta shares were weighed by the company's latest capital expenditures guidance, while user growth disappointed. The company also raised its capex spending for the year. That was a similar point of concern for Microsoft, as shares were under pressure after the company said spending will reach $190 billion due to high memory costs.
"What was most important on the ["Magnificent Seven"] earnings is that we didn't learn anything," said Tom Graff, Facet's chief investment officer. "The worry has been for months now that, 'Hey, they're all spending a lot, and that's great, and that's flowing through to earnings of other companies like Nvidia and whatnot, but at the same time, the [return on investment] is not quite there. The spending keeps going up and up and up, and there's sort of no end in sight."
"Something that we're just going to keep keep wrestling with until we know one way or the other is: Does this AI spend at some point turn into software-like margins, or does it not really and we need to rethink these multiples?" Graff added.
Even with the latest pressure in tech, a jump in those stocks has placed the three major averages on pace to round out a strong month. The S&P 500 has risen more than 9% month to date, putting the index on pace for its best month since November 2020. The Nasdaq is heading for a 13% jump, tracking for its best month since April 2020. The Dow is set to end April with a more than 6% gain — its strongest monthly performance since November 2024.
Meanwhile, oil prices reversed course Thursday, with Brent crude futures losing 3% to trade above $114 a barrel and West Texas Intermediate futures falling 2% to trade above $104. Crude prices rose Wednesday as overseas tensions remained high between the U.S. and Iran. The Wall Street Journal, citing U.S. officials, reported that President Donald Trump told his aides to prepare for an extended blockade of Iran.