Markets rose on Friday, boosted by gains from Google parent Alphabet Inc. and Microsoft Corp., two of the so-called “Magnificent Seven” stocks, both of which reported above-average sales and profits.
Microsoft’s revenue outlook for the next quarter was higher than analyst expectations, while Alphabet announced it would begin paying a dividend of $0.20 per share. Alphabet rose more than 10% after the open and Microsoft rose over 2% in early trading on Friday.
Rallies in stocks boosted broader markets, with the Nasdaq up 2.2% in mid-morning trading and the S&P 500 gaining about 1%. ETFs that track the indices rose similarly: SPY, the SPDR S&P 500 ETF Trust was 1.1% higher, while QQQ, the Invesco QQQ Trust which tracks the tech-heavy Nasdaq, rose 1.7%.
MAGS, that Roundhill Magnificent Seven ETF which holds Mag 7 shares in its fund, rose more than 3%.
Earnings surprises from Microsoft and Alphabet are helping to brighten the less-than-rosy picture painted by tech companies at the start of this earnings season. Tech earnings have been in focus since last week as investors questioned whether the megacap tech companies that have led markets for so long would continue to do so in the future.
While earnings from Microsoft and Alphabet pleased investors, Tesla Inc., Netflix Inc. and Meta Platforms Inc. reported disappointing results that kept markets under pressure earlier in the week.
The Dow barely changed, gaining half a percentage point. SLIDE, the SPDR Dow Jones Industrial Average ETF Trust rose 0.2%.
Better-than-expected earnings from Microsoft and Alphabet helped investors look beyond inflation data released on Friday. Personal consumption expenditures (PCE) rose 0.3% in March, the Commerce Department reported Friday. The monthly increase was in line with the expectations of economists surveyed by Dow Jones. But the 2.7% year-over-year increase (excluding the volatile food and energy categories) highlighted how persistent and stubborn inflation has been.
The data came just a day after the Commerce Department released first-quarter PCE numbers, giving investors a taste of what was to come today. Thursday’s advance PCE reading dashed investors’ hopes that interest rate cuts would come soon.
PCE remains the Fed’s preferred inflation indicator and is important information for policy meetings about rate cuts. The Fed is expected to keep interest rates steady at next week’s FOMC meeting, but questions still remain as to when investors – and the economy – can expect relief from a high-yield environment.
According to the CME Fed Watch Tool, markets do not expect a rate cut until September.
Bond yields fell on Friday, just a day after data showed economic growth was slowing. As bond prices rose (prices and yields are inversely related), TLT, the iShares 20+ Year Treasury Bond ETFjumped by almost 1%.
Fixed income investors are reeling as fears and questions about interest rates have sent bond ETFs on a rollercoaster ride.
TLT YTD chart
Source: etf.com
While investors continued to enjoy better-than-expected tech returns, tech ETFs remained the most active in terms of trading volume, according to data from etf.com. TQQQ, that ProShares UltraPro QQQ and SQQQ, that ProShares UltraPro Short QQQ which bets on falling technology prices, saw trading volume of 36.2 million shares and 67 million shares, respectively.
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