(Bloomberg) — U.S. equity futures advanced as blockbuster earnings from Microsoft Corp. and Alphabet Inc. pointed to a surge in artificial intelligence that has kept gains on track for technology stocks.
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Google owner Alphabet rose as much as 12% in premarket trading, set to add more than $230 billion to its market capitalization and give it a valuation of more than $2 trillion. Microsoft rose 4%. The companies shattered Wall Street estimates with their latest quarterly results, partly driven by demand for AI services.
The strong earnings were a relief to investors worried about high valuations in the tech sector, and came as markets were jittery after data showing a sharp economic slowdown and stubborn inflation in the US sent Treasury yields higher. The question is whether the performance of some tech megacaps can sustain the broader market rally.
While earnings remain center stage, the focus on Friday will also be on US data, with the Federal Reserve’s favorite measure of inflation of particular interest. Treasury yields fell after yesterday’s bond-market losses as economic data pushed back expectations of a policy easing. A gauge of the dollar was stable.
“We have an uncertain situation where the earnings of a few large companies are impacting sentiment across the market,” said Justin Onuekwusi, chief investment officer at St. James’s Place Management. “We have seen a little bit of volatility due to the decline in rates as well as earnings and this is likely to continue.”
Nearly 80% of S&P 500 companies that have reported so far have beaten analysts’ earnings estimates, according to JPMorgan Chase & Co. strategists. Still, stock price reactions have been disappointing, with better-than-expected results falling below average, while those missing estimates are being punished more than usual, the strategists wrote. More than 50% of S&P 500 companies have not yet reported.
In other earnings-related moves, Exxon Mobil Corp fell as much as 2.8% after missing EPS estimates, while Intel Corp fell more than 7% after providing weaker-than-expected guidance.
Meanwhile, the yen fell to a record low against the dollar, leaving traders on alert for any signs of intervention by Japan. The yen rose sharply from the day’s low to near its all-time high in nervous trading following the Bank of Japan’s decision to keep monetary policy unchanged.
“Should the yen fall further from here, such as after the BOJ’s decision in September 2022, the likelihood of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp. “The action will begin.”
The Stoxx Europe 600 index rose, led by technology shares. Miners rose as copper hit $10,000 a tonne for the first time in two years, although Anglo American Plc underperformed after BHP Group rejected a $39 billion takeover offer. The chemicals sector was in the red after IMCD NV’s disappointing earnings.
ThyssenKrupp AG jumped more than 10% after Czech billionaire Daniel Kratinsky’s EP Corporate Group agreed to take a 20% stake in the German company’s troubled steel unit. Amundi SA rose after reporting net flow that beat average analyst estimates for the first quarter. NatWest Group PLC advances after earnings decline.
Elsewhere, gold rose on Friday, while the precious metal was headed for a weekly loss. West Texas Intermediate crude oil hit its highest level in more than a week, accelerating weekly gains.
Major events of this week:
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US Personal Income and Expenditures, PCE Deflator, University of Michigan Consumer Sentiment, Friday
Some key movements in the markets:
shares
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S&P 500 futures rose 0.7% at 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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Stoxx Europe 600 rose 0.7%
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MSCI World Index rose 0.2%
currencies
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The Bloomberg Dollar Spot Index was little changed
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Euro 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
cryptocurrency
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Bitcoin fell 0.9% to $64,221.25
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Ether fell 1.3% to $3,132.5
bond
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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 fell two basis points to 2.61%
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UK 10-year yield fell one basis point to 4.35%
Goods
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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 generated with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Yumi Teso and Sujatha Rao.
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