(Bloomberg) — US equity futures advanced as blockbuster earnings from Microsoft Corp. and Alphabet Inc. signaled the artificial intelligence boom that has driven gains for technology stocks remains on track.
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Google owner Alphabet surged as much as 12% in premarket trading, poised to add more than $230 billion to its market capitalization and exceed $2 trillion in valuation. Microsoft rose 4%. The companies trounced Wall Street estimates with their latest quarterly results, fueled in part by demand for AI services.
The strong earnings were a relief to investors worried about lofty valuations in the tech sector, and came after the market was rattled by data showing a sharp US economic slowdown and stubborn inflation that drove Treasury yields higher. The question is whether the performance of a few tech megacaps can sustain a broader market rally.
While earnings remain center stage, the focus Friday will also be on US data, with the Federal Reserve’s preferred measure of inflation of particular interest. Treasury yields dipped following yesterday’s bond-market losses when economic data pushed back expectations for policy easing. A gauge of the dollar was steady.
“We have a precarious situation where the earnings of a few big companies are driving sentiment on the entire market,” said Justin Onuekwusi, chief investment officer St James Place Management. “We have seen a bit of volatility driven by earnings as well as rate decreases being priced out and that’s likely to continue.”
Almost 80% of S&P 500 firms that have reported so far have beaten analysts’ earnings estimates, according to JPMorgan Chase & Co. strategists. Still, stock price reactions have been underwhelming, with better-than-expected results seeing below average upside, while those missing estimates are being penalized by more than usual, the strategists wrote. More than 50% of S&P 500 companies have yet to report.
In other earnings-related moves, Exxon Mobil Corp. fell as much as 2.8% after missing EPS estimates, while Intel Corp. slumped more than 7% after providing weaker-than-anticipated guidance.
Meanwhile, the yen’s slump to a record low versus the dollar has left traders on guard for any hints of intervention from Japan. The yen swung sharply from the day’s low to near its high amid jittery trading in the wake of the Bank of Japan’s decision to keep monetary policy unchanged.
“Should the yen fall further from here, like after the BOJ 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 it’s the speed that will trigger the action.”
The Stoxx Europe 600 index climbed, with technology shares leading the advance. Miners rose as copper hit $10,000 a ton for the first time in two years, though Anglo American Plc underperformed after rejecting BHP Group’s $39 billion takeover proposal. The chemicals sector was in the red after disappointing earnings from 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 troubled steel unit. Amundi SA rose after reporting net inflows for the first quarter that beat the average analyst estimate. NatWest Group Plc advanced after an earnings beat.
Elsewhere, gold climbed Friday even as the precious metal headed for a weekly loss. West Texas Intermediate crude oil rose to the highest level in more than a week, on pace for a weekly advance.
Key events this week:
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US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.7% as of 6:46 a.m. New York time
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Nasdaq 100 futures rose 1%
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Futures on the Dow Jones Industrial Average rose 0.1%
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The Stoxx Europe 600 rose 0.7%
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The MSCI World index rose 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was unchanged at $1.0730
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The British pound was little changed at $1.2511
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The Japanese yen fell 0.7% to 156.76 per dollar
Cryptocurrencies
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Bitcoin fell 0.9% to $64,221.25
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Ether fell 1.3% to $3,132.5
Bonds
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The yield on 10-year Treasuries declined one basis point to 4.69%
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Germany’s 10-year yield declined two basis points to 2.61%
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Britain’s 10-year yield declined one basis point to 4.35%
Commodities
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West Texas Intermediate crude rose 0.7% to $84.15 a barrel
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Spot gold rose 0.7% to $2,349 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Yumi Teso and Sujata Rao.
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