The US stock market saw a surge on Friday, boosted by stellar earnings reports from industry giants Alphabet and Microsoft. Despite concerns about persistent inflation, investors found renewed optimism in the prospects of a Big Tech-led market rebound.
The S&P 500 index rose about 0.6%, while the tech-heavy Nasdaq Composite rose 1.4%. In contrast, the Dow Jones Industrial Average, with its lower exposure to technology stocks, posted marginal gains, reflecting the diverse performance of the sectors.
Alphabet shares saw an impressive rise of around 12% in pre-market trading following the company’s announcement of its first dividend and a major share buyback. Meanwhile, Microsoft shares rose 4% after beating Wall Street expectations for third-quarter revenue and earnings, driven by strong adoption of AI within its cloud services.
The remarkable performance of these tech giants revived confidence among investors, fueling hopes that the gains of the broader “Magnificent Seven” tech companies could lift the entire market. This sentiment was particularly encouraging after Meta’s disappointing forecast earlier in the week.
However, amid the positive earnings reports, investors also examined the latest reading of the Federal Reserve’s preferred inflation gauge, the March Personal Consumption Expenditures Price Index. While the index’s core measure, which excludes food and energy costs, beat economists’ expectations with a 2.8% increase from a year ago, concerns persisted about achieving the Federal Reserve’s 2% inflation target sustainably.
However, investors remained largely unfazed, putting aside concerns about inflation and focusing on the possibility of another Big Tech-driven rally to mitigate broader uncertainties surrounding the Federal Reserve’s policies.
In other market moves, Snap shares rose 25% in morning trading, boosted by optimism about an overhaul of the company’s digital advertising business. Additionally, Rubrick shares soared 16% to $37, reflecting investor enthusiasm for the debut of another AI-focused company.
Looking ahead, analysts are closely monitoring spending trends related to AI development at major tech companies, particularly after Microsoft and Alphabet echoed a similar sentiment of increased spending in their recent earnings reports. Despite these concerns, the market remains poised for further developments as investors navigate the changing landscape of technology-driven growth and economic indicators.
Also read: Wall Street Set for Gains on Tech Boom, Positive PCE Data