US Equity Futures Rise on Strong Earnings from Microsoft and Alphabet
New York, NY — In a positive start to the trading day, US equity futures displayed an upward trajectory as technology giants Microsoft Corp. and Alphabet Inc. released impressive earnings reports, affirming the continued success of the artificial intelligence industry.
Market Confidence Boosted by Surging Alphabet Stock
Alphabet, the parent company of Google, witnessed a surge of as much as 12% in premarket trading, positioning itself to exceed a $2 trillion market valuation and add over $230 billion to its market capitalization. Simultaneously, Microsoft experienced a 4% rise in stock prices. Both companies largely surpassed Wall Street estimates, largely fueled by a growing demand for AI services.
These robust earnings reports have provided much-needed relief to investors concerned about lofty valuations in the technology sector. The market had recently been unsettled by data revealing a significant slowdown in the US economy and persistent inflation, which drove Treasury yields higher. However, the outstanding performance of these tech giants raises the question of whether a market rally can be sustained by these few mega-cap companies alone.
Strong US Data and Inflation Figures in Focus
While earnings reports take center stage, today’s focus will also be on US data, particularly the Federal Reserve’s preferred measure of inflation. Yesterday’s bond-market losses, prompted by economic data that pushed back expectations for policy easing, led to a dip in Treasury yields. The performance of the dollar remains relatively steady.
Justin Onuekwusi, chief investment officer at St James Place Management, pointed out, “We have a precarious situation where the earnings of a few big companies are driving sentiment on the entire market. We have seen a bit of volatility driven by earnings as well as rate decreases being priced out, and that’s likely to continue.”
Impressive Earnings Results from S&P 500 Firms
JPMorgan Chase & Co. strategists reveal that nearly 80% of S&P 500 firms, which have reported their earnings so far, have surpassed analyst estimates. However, the reactions in stock prices have been relatively underwhelming. While companies that outperformed expectations are experiencing below-average upside, those that failed to meet estimates face substantial penalties, adding to the market turbulence. More than 50% of S&P 500 companies are yet to announce their quarterly results.
Two notable negative moves were seen in Exxon Mobil Corp., which fell by as much as 2.8% after missing earnings per share (EPS) estimates, and Intel Corp., which slumped over 7% due to weaker-than-anticipated guidance.
Record Low Yen and European Market Outlook
Concerns of potential intervention surround the yen as it weakened to a record low against the dollar, leaving traders vigilant for any signs of intervention from Japan. The yen experienced significant fluctuations throughout the trading day after the Bank of Japan decided to maintain its current monetary policy.
In Europe, the Stoxx Europe 600 index witnessed a rise, largely driven by the advancements in technology shares. Rising copper prices pushed miners to perform well, while Anglo American Plc lagged due to its rejection of a $39 billion takeover proposal from BHP Group. However, the chemicals sector faced a decline after underwhelming earnings from IMCD NV.
Thyssenkrupp AG witnessed a significant jump of over 10% after Czech billionaire Daniel Kretinsky’s EP Corporate Group agreed to acquire a 20% stake in the German company’s troubled steel unit. Additionally, Amundi SA reported net inflows for the first quarter, surpassing average analyst estimates, leading to a rise in their stock prices. British banking institution NatWest Group Plc also experienced gains following impressive earnings.
Precious Metal and Energy Sector Performance
As for commodities, gold experienced a rise on Friday, despite heading for a weekly loss. West Texas Intermediate crude oil, on the other hand, reached its highest level in over a week, indicating a positive weekly trend.
Key Events to Watch
Key events to keep an eye on this week include US personal income and spending, PCE deflator, and University of Michigan consumer sentiment, which will shape market sentiment and provide further insights into the US economy.
Market Snapshot
Stocks:
- S&P 500 futures rose 0.7% as of 6:46 a.m. New York time
- Nasdaq 100 futures rose 1%
- Futures on the Dow Jones Industrial Average rose 0.1%
- The Stoxx Europe 600 rose 0.7%
- The MSCI World index rose 0.2%
Currencies:
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.0730
- The British pound was 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
Bonds:
- The yield on 10-year Treasuries declined one basis point to 4.69%
- Germany’s 10-year yield declined two basis points to 2.61%
- Britain’s 10-year yield declined one basis point to 4.35%
Commodities:
- 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 assistance of Bloomberg Automation.
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