Stocks continued the week's rally on the strength of corporate earnings reports. The Dow Jones Industrial Average (DJINDICES:^DJI) added half a percentage point and the broader S&P 500 (SNPINDEX:^GSPC) gained a bit less.

Today's stock market

Index Percentage Change Point Change
Dow 0.50% 126.73
S&P 500 0.28% 8.05

Data source: Yahoo! Finance.

Energy shares helped the market move higher, with the Energy Select Sector SPDR ETF (NYSEMKT:XLE) gaining 0.7%. The biotech sector also had a good day; the iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) rose 1.2%.

As for individual stocks, Etsy (NASDAQ:ETSY) popped on strong sales and growing margins, while Zillow Group (NASDAQ:Z) (NASDAQ:ZG) tumbled after the company lowered its outlook and announced an acquisition.

Bull figurine and stock graphs.

Image source: Getty Images.

Etsy crafts strong sales momentum

Online marketplace Etsy reported strong sales gains in the second quarter and raised guidance for the year, causing shares to jump 3.3%. Revenue grew 30.2% to $132.4 million, beating analysts' consensus estimate for $126.5 million. Earnings per share came in at $0.03, but would have been $0.07 without the effect of foreign exchange losses. Wall Street was expecting EPS of $0.04.

Gross merchandise sales (GMS) grew 20.4% to $901.7 million. Gross margin improved to 65.7% from 64.9% in Q2 last year, and operating expenses fell 4.5%. Revenue growth and improved margins led to a 118% increase in adjusted EBITDA to $27.7 million. Etsy continued to grow its user community as well, with the number of active buyers up 17% to 36 million and active sellers growing 8% to 2 million.

Looking forward, Etsy raised guidance for full-year GMS growth from 16% to 19% to a range of 18% to 20%. The company's projection for revenue growth was raised a percentage point to 33% to 35%.

Etsy is reaping the benefit of a fee increase, which is helping the bottom line and providing funds for the company to invest in growth. Investors were pleased with results and an outlook for strong sales ahead.

Zillow's latest moves have investors worried

Class C Shares of Zillow tumbled 14.8% after the company released second-quarter results that met expectations, but gave a full-year outlook below analyst projections and announced it is getting in the mortgage origination business. Revenue increased 21.9% to $325 million, about what analysts were expecting. Non-GAAP earnings per share came in at $0.13, up from $0.04 in the period a year earlier and better than the $0.09 Wall Street was expecting. On a GAAP basis, Zillow lost $0.02 per share.

This was the first quarter Zillow reported results from its Zillow Offers program, in which it buys homes directly from sellers. The company is finding that sellers are holding on to their offers for longer than expected before completing the transaction as they search for a home to buy. The result is that Zillow lowered its outlook for full-year revenue to $1.32 billion to $1.35 billion, well below the $1.5 billion analysts had been expecting. It also lowered its outlook for revenue from its rental segment by about $68 million.

Zillow also announced it is acquiring Mortgage Lenders of America for an undisclosed price. The company believes that the ability to offer mortgage origination to buyers will streamline the home-buying process for customers buying homes through Zillow Offers.

The market is skeptical of Zillow's move into direct buying and selling, but the company is focused on improving the experience for its customers, a strategy that may take some time to prove out.

Jim Crumly owns shares of Zillow Group (C shares). The Motley Fool owns shares of and recommends Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool recommends Etsy. The Motley Fool has a disclosure policy.