U.S. stocks opened higher on Friday, shaking off losses from the premarket session, as shifting expectations surrounding the pace of Federal Reserve interest-rate hikes helped to offset weak earnings from some of the largest megacap technology companies.
How are stocks trading?
- The S&P 500 SPX, +1.64% gained 18 points, or 0.5%, to 3,825.
- The Dow Jones Industrial Average DJIA, +1.92% rose 316 points, or 1%, to 32,349.
- The Nasdaq Composite COMP, -8.21% advanced 37 points, or 0.3%, to 10,829.
Both the S&P 500 and Nasdaq were on track to cement their second weekly gain in a row on Friday, although the tech-heavy Nasdaq has substantially lagged after Thursday’s performance, where it was the only one to finish in the red due to this week’s less-than-stellar earnings.
The Dow, meanwhile, was on track to cement its fourth straight weekly gain.
What’s driving markets?
A string of earnings disappointments from megacap tech firms dragged on the Nasdaq this week.
But stocks were back in rally mode on Friday as equity investors, by and large, remained fixated on expectations for the Fed to down shift to smaller interest rate hikes after next week’s policy meeting — an expectation that endured after the latest reports on inflation and wage growth released Friday.
Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., said Friday’s data on inflation and wage growth didn’t interfere with mounting expectations that the Fed might soon pause its campaign of aggressive rate hikes.
“Basically, the market is starting to price in a pause, not a pivot, but maybe a pause. The end is in sight,” Conger said.
See: Market expectations start to shift in direction of slower pace of rate hikes by Fed
The September core personal consumption expenditures price index — the Fed’s preferred gauge of inflation pressures — came in roughly in line with economists expectations, while a more modest 1.2% gain in private wages and salaries in the third quarter was interpreted as a sign that wage growth may have finally peaked, according to Andrew Hunter, senior U.S. economist at Capital Economics.
See: GDP looked great for the U.S. economy, but it really wasn’t
Investors have digested a batch of disappointing numbers from some of America’s largest tech companies this week, which helped to sully the overall quality of S&P 500 earnings this quarter.
On Thursday night, Amazon.com AMZN, -8.36% joined Microsoft Corp. MSFT, +3.20%, Alphabet Inc. GOOGL, +2.45% and Meta Platforms Inc. META, +1.53% by publishing disappointing earnings for the quarter that ended Sept. 30.
Shares of Amazon were off 10% after the e-commerce giant, which dominates the consumer-discretionary sector, predicted slower holiday sales and profit while also reporting slower-than-expected growth in its key cloud-computing business.
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Peter Garnry, head of equity strategy at Saxo Bank, said investors were unnerved by Amazon’s guidance cut.
“The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4 billion vs est. $4.7 billion and revenue of $140-148 billion vs est. $155.5 billion,” he said in a note.
One notable exception to the downbeat earnings news this week was Apple Inc. AAPL, +7.63%, which proved a bright spot after the iPhone maker’s revenue and earnings topped forecasts, helped by record back-to-school sales of Macs. Shares were up nearly 0.9% in premarket trading.
Remaining on the economic calendar for Friday, the final reading of the University of Michigan consumer sentiment index for October and five-year inflation expectations — also closely watched by the Fed — are due at 10 a.m. Eastern, alongside pending home sales for September.
Stocks continued to climb after the open as Treasury yields moderated, with the yield on the 10-year breaking back below 4%, though it remained higher on the day. The yield on the 10-year TMUBMUSD10Y, 3.968% was up 2.5 basis points at 3.969%.
The ICE U.S. Dollar DXY, +0.22% Index, which measures the strength of the dollar against a basket of rivals, was flat at 110.
Single-stock movers
- Oil giants Chevron Corp. CVX and Exxon Mobil Corp. XOM were climbing on Friday after reporting strong results.
- Pinterest Inc. PINS also saw strong sales and profit in the third quarter, beating Wall Street expectations. Its shares were up more than 14%.
- Intel Corp. INTC shares advanced more than 8% after reporting an earnings beat. The chip maker said it would cut costs by $3 billion next year, and lay off employees, as it trimmed its outlook again.
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