The stock market made a comeback this Friday, April 26th, fueled by strong earnings reports from big tech giants Alphabet (GOOG, GOOGL) and Microsoft (MSFT). This positive news helped ease earlier concerns raised by disappointing earnings from Meta (META) and hotter-than-expected inflation data.
The S&P 500 (^GSPC) gained 1%, the tech-heavy Nasdaq Composite (^IXIC) climbed 1.9%, and even the Dow Jones Industrial Average (^DJI), with its lower tech weighting, rose 0.5% (over 150 points).
Big Tech Boosts Market Sentiment
The stellar performance by Alphabet and Microsoft, with stock prices jumping 9% and 3% respectively, injected some much-needed optimism after a sell-off on Thursday. Both companies highlighted strong cloud revenue growth driven by robust Artificial Intelligence (AI) demand, suggesting a potential industry boom that could benefit others in the "Magnificent Seven" tech group.
This strong showing boosted confidence that earnings from these leading tech companies can pull the broader market out of its recent slump. Earlier in the week, Meta's disappointing forecast had dimmed investor spirits.
Inflation Gauge Raises Concerns
However, the market rally wasn't without its challenges. Investors simultaneously digested the latest reading of the personal consumption expenditures price index (PCE), the Federal Reserve's preferred inflation gauge. While the core measure, excluding food and energy, remained unchanged at 2.8% year-over-year, this figure was above analyst expectations of 2.7%.
This reading further shows persistent inflation concerns, which have caused a dramatic shift in expectations for Federal Reserve monetary policy. Since the year began, traders have significantly revised their forecasts, going from anticipating seven rate cuts in 2024 to just one.
Snap Soars on Ad Business Revamp
In other news, Snap (SNAP) shares surged a whopping 23%. This positive response suggests that Wall Street is optimistic about the company's efforts to revitalize its digital advertising business.
The stock market's bounce back on Friday shows the critical role Big Tech continues to play in investor sentiment. However, lingering inflation concerns and shifting Fed rate hike expectations continue to cast a shadow of doubt on the future market direction. Investors will likely remain cautious until they get a clearer picture of these factors' impact on future corporate earnings.
