Upbeat Alphabet, Microsoft Earnings May Spark Early Rally On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to extend the recovery from the sell-off seen early in the previous session.

The upward momentum on Wall Street comes amid a positive reaction to some of the latest earnings news from big-name tech companies.

Shares of Alphabet (GOOGL) are surging by 11.3 percent in pre-market trading after the Google parent reported better than expected first quarter results and authorized its first-ever dividend as well as a $70 billion stock buyback.

Software giant Microsoft (MSFT) is also seeing substantial pre-market strength after reporting fiscal third quarter results that exceeded expectations.

On the other hand, shares of Intel (INTC) are likely to come under pressure after the semiconductor giant reported first quarter earnings that beat estimates but provided disappointing guidance.

The futures remained firmly positive as closely watched readings on inflation released by the Commerce Department showed consumer prices in the U.S. increased in line with economist estimates in the month of March.

The Commerce Department said its consumer price index rose by 0.3 percent in March, matching the increase seen in February as well as economist estimates.

Excluding food and energy prices, core consumer prices also climbed by 0.3 percent for the second straight month, in line with expectations.

Meanwhile, the report said the annual rate of consumer price growth accelerated to 2.7 percent in March from 2.5 percent in February. Economists had expected the pace of growth to tick up to 2.6 percent.

The annual rate of growth by core consumer prices in March came in unchanged from February at 2.8 percent, while economists had expected the pace of growth to slow to 2.6 percent.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending in the month of March.

After moving sharply lower early in the session, stocks regained ground over the course of the trading day on Thursday but remained mostly lower. The major averages all finished the day in negative territory after ending Wednesday’s trading narrowly mixed.

The Dow slumped 375.12 points or 1.0 percent to 38,085.80 after plunging by more than 700 points in early trading. The Nasdaq slid 100.99 points or 0.6 percent to 15,611.76 and the S&P 500 fell 23.21 points or 0.5 percent at 5,048.42.

A negative reaction to earnings news from Meta Platforms (META) contributed to the early sell-off on Wall Street, with the Facebook parent plunging by 10.6 percent.

Meta Platforms reported first quarter results that beat estimates on both the top and bottom lines but provided disappointing second quarter revenue guidance.

Tech giant IBM Corp. (IBM) also dove by 8.3 after reporting weaker than expected first quarter revenues. IBM also announced a deal to acquire HashiCorp (HCP) for $35 per share in cash, representing an enterprise value of $6.4 billion.

On the other hand, fellow Dow component Merck (MRK) jumped by 2.9 perent after reporting first quarter results that exceeded analyst estimates.

The early sell-off on Wall Street also came after Commerce Department released a report showing the U.S. economy grew by much less than expected in the first quarter of 2024.

The Commerce Department said gross domestic product increased by 1.6 percent in the first quarter after surging by 3.4 percent in the fourth quarter of 2023. Economists had expected GDP to jump by 2.5 percent.

Meanwhile, the Commerce Department said the personal consumption expenditures price index surged 3.4 percent in the first quarter after advancing by 1.8 percent in the fourth quarter.

Excluding food and energy prices, the PCE price index spiked 3.7 percent in the first quarter after jumping by 2.0 percent in the fourth quarter.

“The Fed wants to see inflation start coming down in a persistent manner, but the market wants to see economic growth and corporate profits increasing, so if neither are headed in the right direction then that’s going to be bad news for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

Selling pressure waned over the course of the session, however, inspiring some traders to pick up stocks at relatively reduced levels.

Despite the recovery attempt by the broader markets, telecom stocks continued to see substantial weakness on the day, with the NYSE Arca North American Telecom Index plunging by 2.7 percent.

Significant weakness also remained visible among software stocks, as reflected by the 1.8 percent loss posted by the Dow Jones U.S. Software Index.

Biotechnology, banking stocks and networking stocks also continued to see considerable weakness, although selling pressure waned from earlier in the session.

Meanwhile, gold stocks moved sharply higher on the day, resulting in a 4.2 percent spike by the NYSE Arca Gold Bugs Index.

Notable strength also emerged among semiconductor stocks, driving the Philadelphia Semiconductor Index up by 2.0 percent.

Commodity, Currency Markets

Crude oil futures are advancing $0.74 to $84.31 a barrel after climbing $0.76 to $83.57 a barrel on Thursday. Meanwhile, after inching up $4.10 to $2,342.50 an ounce in the previous session, gold futures are rising $16.90 to $2,359.40 an ounce.

On the currency front, the U.S. dollar is trading at 156.88 yen versus the 155.65 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0717 compared to yesterday’s $1.0730.

Asia

Asian stocks rose broadly on Friday as Microsoft and Google’s parent company Alphabet both beat Wall Street’s first quarter expectations, offsetting Meta Platforms’ disappointing forward guidance.

The yen hit a fresh 34-year low as the Bank of Japan ended its two-day policy meeting with no change to interest rates and the target policy rate.

Oil and gold traded higher in Asian trading as the dollar index stabilized around a two-week low following the U.S. GDP surprise.

Mainland Chinese and Hong Kong stocks posted strong gains after experts from international investment firms revised their outlook on Chinese stocks.

China’s Shanghai Composite Index rallied 1.2 percent to 3,088.64, while Hong Kong’s Hang Seng Index jumped 2.1 percent to 17,651.15.

Japanese markets advanced after the Bank of Japan expressed confidence that inflation was on track to durably hit 2 percent in coming years.

Market participants also reacted to Tokyo’s inflation figures and comments by Japanese Finance Minister Shunichi Suzuki that the country is concerned about negative effects of the weak yen.

The Nikkei 225 Index climbed 0.8 percent to 37,934.76 and closed up 2.3 percent for the week. The broader Topix Index settled 0.9 percent higher at 2,686.48. Tech and real estate stocks paced the gainers, with Tokyo Electron rising 1.9 percent and Mitsui Fudosan adding 3.6 percent.

Startup-investor SoftBank Group climbed 2.4 percent. Chip material maker Shin-Etsu Chemical slumped 6.4 percent after announcing a takeover offer for Mimasu Semiconductor Industry.

Seoul stocks closed sharply higher, led by tech and financial stocks. The Kospi edged up 1.1 percent at 2,656.33. SK Hynix surged 4.2 percent, KB Financial soared 9.7 percent and Shinhan Financial climbed 7.5 percent.

Australian and New Zealand markets fell as trading resumed after the Anzac Day holiday on Thursday. Australia’s benchmark S&P ASX 200 Index dropped 1.4 percent to 7,575.90, while the broader All Ordinaries index closed 1.3 percent lower at 7,837.40.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index slumped 1.2 percent to 11,805.09.

Europe

European stocks are seeing modest gains in cautious trading on Friday after U.S. tech giants Microsoft and Alphabet posted strong quarterly earnings and an ECB survey showed Euro zone consumers lowered their expectation for inflation over the next 12 months in March.

Meanwhile, French consumer confidence unexpectedly decreased in April, monthly survey data from the statistical office INSEE showed earlier today.

The consumer sentiment index dipped to 90 in April from 91 in the previous month. Economists had expected the score to rise to 92.

Elsewhere, a monthly survey conducted by market research group GfK revealed that British consumer sentiment improved in April on slowing inflation as well as expectations about further tax cuts.

The consumer confidence index rose to -19 in April from -21 in March. The score was also better than economists’ forecast of -20.

While the German DAX Index has jumped by 1.0 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.6 percent.

Thyssenkrupp has soared after the German conglomerate agreed to sell a 20 percent stake in its steel business to EP Corporate Group (EPCG).

Natwest has also surged as the lender reported a slightly smaller-than-expected fall in income and profit for its first quarter.

Home appliance maker Electrolux has also advanced after reporting a smaller-than-expected first quarter loss, while ball-bearing maker SKF has jumped as its first quarter core profit beat estimates.

French construction materials group Saint-Gobain has also moved sharply higher as its first quarter revenues topped forecasts.

Engineering firm Senior Plc has also moved to the upside after reporting increased first quarter revenue and backing its full-year guidance.

Meanwhile, airplane maker Airbus has slumped after posting weaker-than-expected first-quarter operating profit and cashflow.

Aerospace-industry supplier Safran has also moved to the downside despite posting higher first quarter revenues and reaffirming its full-year outlook.

U.S. Economic Reports

Closely watched readings on inflation released by the Commerce Department on Friday showed consumer prices in the U.S. increased in line with economist estimates in the month of March.

The Commerce Department said its consumer price index rose by 0.3 percent in March, matching the increase seen in February as well as economist estimates.

Excluding food and energy prices, core consumer prices also climbed by 0.3 percent for the second straight month, in line with expectations.

Meanwhile, the report said the annual rate of consumer price growth accelerated to 2.7 percent in March from 2.5 percent in February. Economists had expected the pace of growth to tick up to 2.6 percent.

The annual rate of growth by core consumer prices in March came in unchanged from February at 2.8 percent, while economists had expected the pace of growth to slow to 2.6 percent.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending in the month of March.

The report said personal income climbed by 0.5 percent in March after rising by 0.3 percent in February, while personal spending advanced by 0.8 percent for the second straight month.

At 10 am ET, the University of Michigan is scheduled to release its revised on consumer sentiment in the month of April. The consumer sentiment index for April is expected to be unrevised at 77.9, which was down from 79.4 in March.

Stocks In Focus

Shares of Snap (SNAP) are skyrocketing in pre-market trading after the SnapChat parent reported first quarter results that exceeded expectations on both the top and bottom lines.

Footwear company Skechers (SKX) is also seeing significant pre-market strength after reporting better than expected first quarter results.

Meanwhile, shares of Charter Communications (CHTR) may move to the downside after the broadband and cable provider reported first quarter earnings that missed analyst estimates.