Yahoo Finance Hamza Shaban
Stock market today: Nasdaq surges 2% as Big Tech leads rally after earnings
US stocks bounced back on Friday as Alphabet (GOOG, GOOGL) and Microsoft (MSFT) earnings revived hopes for a sustained Big Tech-led rally, even as a reading on the Federal Reserve's preferred inflation gauge showed price pressures remain sticky.
The S&P 500 (^GSPC) rose 1%, while the tech-heavy Nasdaq Composite (^IXIC) climbed 2%. The Dow Jones Industrial Average (^DJI), which includes fewer tech stocks, rose 0.4% or 150 points.
Gains for Alphabet and Microsoft gave stocks a lift, with rises of around 10% and 2%, respectively. The stellar results from the "Magnificent Seven" duo showed how growing demand for AI can boost cloud revenue and signaled that both companies stand to benefit from that boom. Alphabet's market cap surpassed $2 trillion, joining an elite group.
The performance fired up confidence that earnings from the Magnificent Seven techs can lift the broader market out of the doldrums. Those hopes had taken a knock from Meta's (META) disappointing forecast earlier in the week.
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At the same time, the market took in the latest reading of the Fed's favored inflation gauge, the personal consumption expenditures price index, for March. The "core" measure in that report, which strips out the cost of food and energy, rose 2.8% over last year, above estimates for 2.7% but unchanged from the previous annual increase.
The reading comes as Wall Street has furiously scaled back its expectations for Fed rate cuts this year. Already, since the start of the year, traders have recalibrated their bets from seven to just one.
In other individual movers, Snap (SNAP) shares rocketed 27% as Wall Street welcomed signs a revamp of its digital ad business is finding takers.
LIVE COVERAGE IS OVER13 updates
Stocks end volatile week on a high note with Nasdaq up 2%
The tech-led rally is back as earnings from Alphabet (GOOG, GOOGL) and Microsoft (MSFT) powered a winning week, brushing aside a troublesome reading on the Federal Reserve's preferred inflation gauge that showed price pressures remain sticky.
The S&P 500 (^GSPC) rose 1%, while the tech-heavy Nasdaq Composite (^IXIC) climbed 2%. The Dow Jones Industrial Average (^DJI) rose 0.4% or 150 points.
- Hamza Shaban
A look at the week ahead
Fed Week is almost here.
After another hot inflation reading reinforced the idea that any near-term interest rate cuts are less likely, investors will be closely watching the Federal Reserve's policy meeting next week for signs of what will come next.
For months, officials have dampened hopes that a rate cut will arrive soon, as inflation readings continue to show stubborn price pressures. At the press conference on Wednesday, Fed Chair Powell is expected to address these concerns, offering insight into a posture of maintaining rates higher for longer, even as some critics of the central bank have called for easing rates.
The end of the week will also bring April's jobs numbers.
Economic updates will only be part of the story in the coming days. The tech giants Apple (AAPL) and Amazon (AMZN) are on deck to report, following strong showings from Microsoft (MSFT) and Google parent Alphabet (GOOG, GOOGL) and a cold reception for Meta'a (META) massive AI spending.
An array of corporate giants outside of the tech world are also set to announce earnings, including McDonald's (MCD), Coca-Cola (K0) Mastercard (MA).
Yahoo Finance's Brent Sanchez has a graphical breakdown of what to watch next week:
- Hamza Shaban
Alphabet is set to enter the $2 trillion club
Google parent Alphabet (GOOG, GOOGL) is poised to join an elite group of tech companies valued at more than $2 trillion.
Shares on Friday rose more than 9% following a standout quarter that beat estimates on the top and bottom lines, and that ushered in a new dividend program and $70 billion in buybacks.
The stellar report led to an increase of almost $200 million in the company's market cap, pushing it into the upper echelon, alongside Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA).
While Alphabet's push into generative AI has been marred with setbacks and a perception of playing catchup to Microsoft, company executives emphasized that its investments in new models and the integration of the technology places the company at the forefront of the AI era.
Capital expenditures came in at $12 billion for the quarter, mostly tied to servers and data centers. CFO Ruth Porat said during the earnings call that the quarters ahead will register similar levels of spending, reflecting the company’s confidence in its AI investments.
Rumors of Alphabet's demise are greatly exaggerated, wrote Wedbush analysts in a note on Friday. "We think 1Q results further validate Google’s position as a leading AI beneficiary."
- Hamza Shaban
Meta gets the cold shoulder amid an AI spending spree
Unlike Alphabet (GOOG, GOOGL) and Microsoft (MSFT), which have been celebrated on Wall Street for diving headfirst into AI development, Meta (META) received a different reaction after its latest earnings report.
CEO Mark Zuckerberg invoked an earlier Facebook era, when the social network transitioned to mobile phones, to remind investors that you must first spend money to make money. He was right to remind investors about the concept of, well, investing because after glimpsing the sheer cost of an AI investment spree, Wall Street shoved Meta shares down an elevator shaft.
While the News Feed, Reels, and Stories solidified the company's grow first, monetize later playbook, investors are still not fully on board with Zuckerberg's AI gambit.
The rough reception to Meta's earnings provided a mirror image of Tesla's (TSLA) post-report surge. As Elon Musk's marketing alchemy showed earlier this week, a heavy sprinkling of visionary storytelling and market appeasement can mean more than what the numbers say. Where investors looked past Tesla's weakened financials and embraced Musk's latest fantasy, they brushed aside Meta's solid performance and stopped listening.
But even Zuckerberg acknowledged that Meta's AI development will be a larger undertaking than monetizing Reels and Stories, which began as copycat features, and fed off an existing social media empire.
- Hamza Shaban
Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Friday:
Roku (ROKU): The smart TV operator shed 8% in afternoon trading Friday after cautioning that the financial advantages of price hikes are beginning to dissipate. Roku also warned that heightened competition in the ad-supported streaming space could create a significant headwind.
Skechers (SKX): The footwear and apparel company surged 13% Friday following first quarter results that surpassed revenue and earnings forecasts and offered an upbeat forecast. The stock was poised to close at an all time high.
Alphabet (GOOG, GOOGL): Google's parent company gained 10% in morning trading on Friday, surpassing a market cap of $2 trillion after announcing standout quarterly results that beat revenue and earnings estimates. The search giant stoked investor excitement with the announcement of a new cash dividend program of $0.20 per share and $70 billion in stock buybacks.
Snap (SNAP): The social media company surged after reporting first quarter results that surpassed revenue expectations, boasting a 21% year-over-year increase in revenue for the quarter. The stock rocketed 27% in the morning session.
- Dani Romero
First time homebuyers are getting squeezed by high mortgage rates, builder earnings show
Entry level buyers are getting hit the hardest by mortgage rates hovering around 7%.
Wedbush analyst Jay McCanless said in a note this week that "it appears move up/luxury buyers have more momentum than entry level/first time buyers who are facing affordability challenges."
Just look at the most recently quarterly results of three homebuilders — D.R. Horton (DHI), PulteGroup (PHM), and M/I Homes (MHO) — as evidence.
McCanless explained in an email to Yahoo Finance: "Pulte has the smallest (39%) focus on first time buyers, and their order growth was much better than expected. DHI and MHO each have 50% to 60% focus on first time buyers. Both builders beat our order estimate but by a much smaller margin."
PulteGroup CEO Ryan Marshall noted on the company's earnings call following its Q1 beat that 60% of its business is move-up and active adult, "which tends to not be quite as rate-sensitive as the first-time buyer."
The environment may not get easier for first-time buyers anytime soon. Mortgage rates hit 7.1% this week, the highest level since November 2023. Meanwhile, recent sticky inflation prints have thrown into the question the timeline for interest rate cuts by the Federal Reserve.
- Hamza Shaban
Stocks pick up steam in afternoon trading
Stock gains picked up steam Friday afternoon as investors shook off momentary worries tied to another sticky inflation reading and embraced strong financial showings from tech giants Alphabet (GOOG, GOOGL) and Microsoft (MSFT), reviving hopes for another Big Tech-led rally.
The S&P 500 (^GSPC) rose 1.1%, while the tech-heavy Nasdaq Composite (^IXIC) climbed more than 2%. The Dow Jones Industrial Average (^DJI), rose 0.4% or more than 150 points.
- Hamza Shaban
Chevron, Exxon under pressure as falling natural gas prices hit profits
Two of the biggest names in the energy business posted tough earnings results Friday.
Oil majors Chevron (CVX) and ExxonMobil (XOM) fell 0.7% and more than 3%, respectively, as both companies reported year-over-year profit declines for the first quarter that were impacted by lower natural gas prices and a decrease in refining margins, Yahoo Finance's Ines Ferre.
Natural gas prices have plummeted this past year, down roughly 34% year-to-date.
But oil majors could benefit from rising oil prices in coming quarters.
Crude prices were slightly higher in the first quarter of this year compared to last year. The biggest price action came in mid-March when West Texas Intermediate prices broke out above $80 amid rising geopolitical tensions.
Most Wall Street analysts expect oil to stay above the $80 level for the time being, creating a tailwind for energy companies.
- Hamza Shaban
Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday:
Alphabet (GOOG, GOOGL): Google's parent company gained 10% in morning trading on Friday, surpassing a market cap of $2 trillion after announcing standout quarterly results that beat revenue and earnings estimates. The search giant stoked investor excitement with the announcement of a new cash dividend program of $0.20 per share and $70 billion in stock buybacks.
Snap (SNAP): The social media company surged after reporting first quarter results that surpassed revenue expectations, boasting a 21% year-over-year increase in revenue for the quarter. The stock rocketed 27% in the morning session.
Intel (INTC): Shares of the semiconductor maker shed 9% Friday morning after the company posted first quarter results, revealing a better-than-expected profit. But the forecast for the second quarter came in lower than analysts had anticipated.
Chevron (CVX): The energy giant gell less than 1% Friday following first quarter earnings that showed falling revenue compared to the same period last year. Chevron said the revenue drop is partly due to lower margins on refined product sales. Exxon Mobil (XOM) fell more than 3% after posting adjusted EPS that fell below estimates.
- Hamza Shaban
Stubborn inflation reading will bring more 'wait and see' from the Fed
The Federal Reserve's cautious approach to interest rate policy over the past year has translated to an ethos of constantly following the data. But with Friday's PCE reading showing that March prices increased more than Wall Street expected, it's likely officials will "wait and see" for yet another batch of economic data.
"When it comes to inflation, the Fed can't catch a break," analysts at Bank of America Global Research said in a note Friday. "At next week's May FOMC meeting, we think the Fed will take a wait-and-see approach to cuts while giving policy more time to work."
The core PCE index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 2.8% over the prior year in March. That was above estimates for 2.7% and unchanged from the annual increase seen in February.
The latest in a string of hotter-than-expected reports has cooled expectations of an imminent rate cut. Fed chair Jerome Powell has emphasized that the central bank won't cut rates until officials are confident of inflation's decline.
Still, some analysts, like many investors, are undeterred by the idea of higher-for-longer interest rates.
"We’re still optimistic on the market, however, as we believe that rate cuts aren’t necessary for the bull market to continue," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in a note on Friday. "Instead, continued economic expansion and growth in corporate profits – which are already seeing from the largest companies in the market – are what will propel stock prices to new highs.
He added: "Just be aware that volatility around the election, geopolitical events and even future inflation data is likely; it’s not going to be a smooth ride this year."
- Hamza Shaban
Stocks rise as investors take sticky inflation reading in stride
Investors breezed past another troublesome inflation reading Friday, riding the hopes that another Big Tech-led rally can elevate the market above broader Fed policy uncertainty.
The S&P 500 (^GSPC) rose roughly 0.6%, while the tech-heavy Nasdaq Composite (^IXIC) climbed 1.4%. The Dow Jones Industrial Average (^DJI) ticked just over the flatline.
- Brian Sozzi
Day two of trading for AI play Rubrik
Rubrick's (RBRK) stock surged 16% to $37 by the close of a rocky day on Wall Street on Thursday, a sizzling response to another AI ecosystem play on its IPO day, similar to the appetite for Reddit's (RDDT) newly issued shares just a few weeks earlier.
The stock is indicating higher in the pre-market today.
But the market response to Rubrik is a sidebar to the story of co-founder and CEO Bipul Sinha — which he shared with me down on the NYSE.
Sinha founded Rubrik in 2014, working in coffee shops by the offices of Google and YouTube in an effort to hire top developer talent.
He doesn't hide his modest upbringing in India, which has fueled his business building.
"Maximal thinking is how I lifted myself out of poverty," Sinha wrote in a letter in the company's IPO prospectus.
"He is the American Dream come true." Lightspeed Venture Partner's co-founder and partner Ravi Mhatre told me.
Our chat on Yahoo Finance Live below.
- Brian Sozzi
Here's one thing analysts are chatting about on Microsoft, Google, & Meta
A lot of folks on Wall Street have been caught off-guard by the spending related to AI buildouts at the big-cap tech companies.
Meta (META) kicked off these concerns earlier in the week, calling out a potential material lift in spending this year and in 2025. The stock promptly got re-priced for that potential, dropping 10.5% on Thursday.
Last night, we heard the same free spending vibe from Microsoft (MSFT) and Alphabet (GOOGL) — though those quarters were good enough to overshadow spending worries.
A couple comments below from the Street on this topic that have caught my eye this morning.
Jefferies on Alphabet's capex:
"Capex of $12.0 billion was up from $11.0 billion in Q4 and nearly double 1Q23's $6.3 billion. Management is guiding future quarterly capex to be at or above Q1 level. We now model 2024 capex of $49.7 billion, up 54% year over year. AI is the big driver as Google sees future benefits across the business. Tech infrastructure, especially servers and data centers, will be 90% of 2024 capex, with offices <10%. While capex is high, Google is focused on efficiencies as machine costs for AI/SGE responses are down 80% since launch a year ago."
Guggenheim on Microsoft's capex:
"Management noted that capex would increase significantly in F4Q driven by build-out of Cloud and AI infrastructure, but no numerical guidance was given. Furthermore, management said that FY25 capex would be greater than FY24 capex. We are currently modeling FY24 capex of $53.4 billion, up almost 70% from FY23, and FY25 capex growth of 20% to $64.0 billion. These are big numbers that will flow through cost of goods sold over time, though it presumably will be utilized to fuel growth in Azure (and Copilot)."
Cost overruns are proving to be the hidden killer of the AI trade.
