U.S. stocks look set to bounce back on Friday as earnings from Alphabet (GOOG, GOOGL) and Microsoft (MSFT) revived hopes of a Big Tech-led rally. But a key inflation report could throw a spanner in the works.
S&P 500 (^GSPC) futures rose about 0.8%, while contracts on the tech-heavy Nasdaq 100 (^NDX) rose 1%. Futures on the Dow Jones Industrial Average (^DJI), which includes fewer technology stocks, rose 0.1%.
Alphabet and Microsoft’s gains are giving stocks a boost after Thursday’s selloff, with gains of around 12% and 4%, respectively. The Magnificent Seven duo’s outstanding results showed that cloud revenue was boosted by strong AI demand – and that both could benefit from this boom.
That boosted confidence that earnings from Magnificent Seven tech companies can lift the broader market out of the doldrums – confidence that was dented by Meta’s (META) disappointing forecast earlier in the week.
At the same time, the market is preparing for the release of the Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditure Price Index for March, on Friday morning. Stock markets sold off on Thursday after a U.S. first-quarter GDP report delivered twin signals: far slower economic growth and higher inflation than expected – although there are signs that price pressures are more of a concern gives.
Investors are waiting closely for the PCE report to confirm that inflation is rising again, which would suggest the Fed cuts interest rates less and later. Since the beginning of the year, traders have adjusted their bets from seven rate cuts in 2024 to one.
Against this backdrop, some investors are expecting the 10-year Treasury yield (^TNX) to break above the key 5% level with a rise of about 80 basis points this year. The benchmark return was around 4.7% on Friday.
Among other individual moves, shares of Snap (SNAP) jumped 26% in premarket trading as Wall Street welcomed signs in its after-market report that a revamp of its digital advertising business is finding takers.
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