(Bloomberg) — U.S. stock futures rose as blockbuster earnings from Microsoft Corp. and Alphabet Inc. said the artificial intelligence boom that has driven gains in technology stocks remains on track.
Most read on Bloomberg
Alphabet, which owns Google, jumped 12% in premarket trading, poised to add more than $230 billion to its market capitalization and surpass $2 trillion in valuation. Microsoft rose 4%. Companies beat Wall Street estimates with their latest quarterly results, fueled in part by demand for AI services.
The strong earnings came as a relief to investors worried about high valuations in the technology sector, and came after the market was rattled by data showing a sharp slowdown in the U.S. economy and stubborn inflation that sent Treasury yields higher. The question is whether the performance of a few tech mega-caps can support a broader market recovery.
While the results remain in focus, Friday will also see a focus on US data, with the Federal Reserve’s preferred measure of inflation of particular interest. Treasury yields fell following yesterday’s bond market losses when economic data pushed back against expectations for policy easing. The dollar indicator was stable.
“We find ourselves in a precarious situation where the profits of a few large companies are influencing sentiment across the market,” said Justin Onuekwusi, chief investment officer of St James Place Management. “We have seen some volatility due to earnings as well as falling interest rates, and this is expected to continue.”
According to JPMorgan Chase & Co. strategists, nearly 80% of the S&P 500 companies that have reported earnings so far have beaten analysts’ earnings estimates. Still, stock price reactions have been disappointing, with better-than-expected results rising below average, while missing estimates are penalized more than usual, the strategists wrote. More than 50% of S&P 500 companies have yet to release a report.
Among other earnings-related moves, Exxon Mobil Corp. fell as much as 2.8% after missing EPS estimates, while Intel Corp. fell more than 7% after providing weaker-than-expected forecasts.
Meanwhile, the yen’s fall to an all-time low against the dollar has put traders on guard against any hints of Japanese intervention. The yen swung sharply from its lowest of the day to near its highest amid choppy trading following the Bank of Japan’s decision to keep its monetary policy unchanged.
“If the yen continues to fall, as after the BoJ’s decision in September 2022, the possibility of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp. “It is not the level but the speed that will trigger action.
The Stoxx Europe 600 index rose, with technology stocks leading the advance. Miners rose as copper hit $10,000 a tonne for the first time in two years, although Anglo American Plc underperformed after rejecting BHP Group’s $39 billion takeover proposal. The chemical sector was in the red after the disappointing results of IMCD NV.
Thyssenkrupp AG jumped more than 10% after Czech billionaire Daniel Kretinsky’s EP Corporate Group agreed to take a 20% stake in the German company’s struggling steel unit. Amundi SA is progressing after recording net inflows in the first quarter above the average analyst estimate. NatWest Group Plc rose after a drop in profits.
Elsewhere, gold climbed on Friday even as the precious metal headed for a weekly loss. West Texas Intermediate crude oil rose to its highest level in more than a week, on pace with a weekly advance.
Key events this week:
-
US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
Some of the main market movements:
Actions
-
S&P 500 futures rose 0.7% as of 6:46 a.m. New York time
-
Nasdaq 100 futures rose 1%
-
Dow Jones Industrial Average futures rose 0.1%
-
The Stoxx Europe 600 increases by 0.7%
-
The MSCI World index increased by 0.2%
Currencies
-
Bloomberg Dollar Spot Index little changed
-
The euro remained unchanged at $1.0730
-
Sterling little changed at $1.2511
-
The Japanese yen fell 0.7% to 156.76 per dollar
Cryptocurrencies
-
Bitcoin fell 0.9% to $64,221.25
-
Ether fell 1.3% to $3,132.5
Obligations
-
The 10-year Treasury yield fell one basis point to 4.69%
-
The German 10-year yield fell two basis points to 2.61%
-
The UK 10-year yield fell one basis point to 4.35%
Raw materials
-
West Texas Intermediate crude rose 0.7% to $84.15 a barrel
-
Spot gold rose 0.7% to $2,349 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Richard Henderson, Yumi Teso and Sujata Rao.
Most read from Bloomberg Businessweek
©2024 Bloomberg LP
