US stocks were set to bounce back on Friday as Alphabet (GOOG, GOOGL) and Microsoft (MSFT) earnings revived hopes for a Big Tech-led rally. But a key inflation report ahead could put a spoke in the wheel.
S&P 500 (^GSPC) futures rose roughly 0.8%, while contracts on the tech-heavy Nasdaq 100 (^NDX) jumped 1%. Futures on the Dow Jones Industrial Average (^DJI), which includes fewer tech stocks, were up 0.1%.
Gains for Alphabet and Microsoft are giving stocks a lift after Thursday’s sell-off, with rises of around 12% and 4%, respectively. The stellar results from the “Magnificent Seven” duo showed cloud revenue boosted by strong AI demand — and scope for both to benefit from that boom.
That fired up confidence that earnings from the Magnificent Seven techs can lift the broader market out of the doldrums — confidence that had taken a knock from Meta’s (META) disappointing forecast earlier in the week.
At the same time, the market is bracing for the release Friday morning of the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index for March. Stocks sold off on Thursday after a US first quarter GDP report brought a double-whammy of signals: far slower economic growth and hotter inflation than expected — though signs are that price pressures are more of a worry.
Investors are watching closely for the PCE report to confirm that inflation is heating up again, which would make the case for the Fed to cut rates less deeply and later. Already, since the start of the year, traders have recalibrated their bets from seven rate cuts in 2024 to one.
With that in mind, some investors are bracing for the 10-year Treasury yield (^TNX) to break above the key level of 5% amid a gain of about 80 basis points this year. The yield on the benchmark was trading around 4.7% on Friday.
In other individual movers, Snap (SNAP) shares rocketed up 26% in premarket trading as Wall Street welcomed signs a revamp of its digital ad business is finding takers in its after-hours report.
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