The US stock market witnessed a significant uptick on Friday as megacap technology stocks led a rally following impressive quarterly performances from industry giants Alphabet and Microsoft, coupled with moderate inflation data.
Investors celebrated Alphabet’s landmark announcement of its first-ever dividend, along with a massive $70 billion stock buyback program, alongside robust first-quarter results. This stellar performance propelled Alphabet’s shares to surge by 10%, reaching a record high and pushing the Google-parent’s market value above the $2 trillion mark.
Microsoft also contributed to the positive sentiment, with its shares rising by 1.8% after surpassing Wall Street’s expectations for third-quarter revenue and profit. The company’s success was attributed to the widespread adoption of artificial intelligence (AI) across its cloud services.
The rally extended to other megacap growth stocks, with Amazon.com surging by 3.4%, Nvidia gaining 5.8%, and Meta Platforms adding 0.4%. However, Apple experienced a slight decline of 0.3%, and Tesla closed down by 1.1%. Meta’s results earlier in the week had disappointed investors, despite increased spending on AI.
Six out of the 11 major S&P 500 sectors ended the day higher, driven by gains in communication services, technology, consumer discretionary, and materials.
The positive momentum resulted in the S&P 500 and the Nasdaq registering their most substantial weekly percentage gains since early November 2023. The benchmark S&P 500 broke a three-week losing streak, while the Nasdaq halted four consecutive weeks of declines.
Tom Plumb, president and lead portfolio manager at Plumb Funds in Madison, Wisconsin, commented on the impact of Microsoft and Google’s earnings reports, stating that they alleviated concerns regarding the compression of margins due to increased spending on data centers and AI.
The Commerce Department’s data showing moderate inflation in March provided additional relief to financial markets, particularly after worries of stagflation surfaced earlier in the week. As a result, money markets indicated a firmer chance of a Federal Reserve rate cut in September.
In terms of individual stocks, Snap saw a remarkable surge of nearly 28% after surpassing first-quarter revenue and user growth estimates. However, Exxon Mobil faced losses of nearly 3% after missing analysts’ profit estimates for the first quarter.
Intel also experienced a downturn, dropping by 9.1% after its second-quarter revenue and profit forecast fell short of expectations. The chipmaker is grappling with weak demand for its traditional data center and PC chips.
Overall, advancing issues outnumbered decliners on both the NYSE and Nasdaq, with the S&P 500 and Nasdaq recording new highs and lows.
With a notable surge in trading volume, the bullish sentiment on Wall Street suggests growing investor confidence as the market navigates through a dynamic economic landscape.