Stock Market Today: US Futures Jump Driven by Stellar Earnings from Alphabet and Microsoft

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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  • The second trading day for AI plays Rubrik

    Rubrick’s (RBRK) stock rose 16% to $37 at the end of a turbulent day on Wall Street on Thursday, a hot reaction to another play in the AI ​​ecosystem on IPO day, similar to the appetite for the Reddit’s newly issued shares (RDDT), which were issued just a year ago a few weeks ago.

    The stock is pointing higher in premarket trading today.

    But the market’s reaction to Rubrik is a side note to co-founder and CEO Bipul Sinha’s story – which he told me at the NYSE.

    Sinha founded Rubrik in 2014, working in coffee shops next to the offices of Google and YouTube to hire top developers.

    He does not hide his humble upbringing in India, which fueled his business development.

    “Through maximum thinking, I lifted myself out of poverty,” Sinha wrote in a letter in the company’s IPO prospectus.

    “It’s the American dream come true,” Ravi Mhatre, co-founder and partner at Lightspeed Venture Partner, told me.

    Our chat on Yahoo Finance Live below.

  • Here’s something analysts at Microsoft, Google and Meta are talking about

    Many people on Wall Street were surprised by the spending related to AI expansion at the big technology companies.

    Meta (META) raised these concerns earlier this week, pointing to a potential significant increase in spending this year and into 2025. The stock immediately adjusted to that potential, falling 10.5% on Thursday.

    Last night we heard the same sentiment on free spending from Microsoft (MSFT) and Alphabet (GOOGL) – although those quarters were good enough to overshadow spending concerns.

    Below are a few comments from the street on this topic that caught my eye this morning.

    Jefferies on Alphabet’s capital expenditures:

    “Capital expenditures of $12.0 billion increased from $11.0 billion in the fourth quarter and nearly doubled the $6.3 billion in the first quarter of ’23. Management expects the future quarterly investments will be at or above the first quarter level. We now forecast capital spending of $49.7 billion in 2024, up 54% year over year. AI is the big driver as Google sees future benefits across the business, particularly in servers and data centers, in 2024, with investments at less than 10%. “However, Google is focused on improving machine cost efficiencies. AI/SGE responses have declined by 80% since launching a year ago.”

    Guggenheim on Microsoft’s investments:

    “Management noted that capital expenditures would increase significantly in the fourth quarter due to the expansion of cloud and AI infrastructure, but no figures were provided. Additionally, management said that FY25 capital expenditures would be higher than FY24 capital expenditures. We currently expect FY24 capital expenditures to be $53.4 billion, an increase of nearly 70% over FY23, and capex growth of 20% to $64.0 billion. These are big numbers that will be factored into cost of goods sold over time, although they will presumably be used to fuel growth at Azure (and Copilot). .”

    Cost overruns are proving to be the hidden killer of AI trading.

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