(Bloomberg) – The world’s biggest technology companies soared in late trading as strong results from Microsoft Corp. and Google parent Alphabet Inc. boosted confidence in Wall Street’s most powerful groups.
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The $250 billion exchange-traded fund (ETF) that tracks the Nasdaq 100 (ticker: QQQ) rose nearly 1.5% after the close of regular trading. To reassure investors worried about the sector’s high valuations, which have supported the bull market, Alphabet announced a dividend after significantly missing revenue expectations. Fellow giant Microsoft also beat expectations, boosted by corporate demand for the software maker’s cloud and artificial intelligence products.
The late rally came after markets were spooked by data that showed exactly what investors didn’t want to hear: a sharp economic slowdown and stubborn inflation. Gross domestic product grew at an annual rate of 1.6%, below all expectations. The underlying inflation rate, which has been closely watched, rose by 3.7%, higher than expected.
“Recent U.S. gross domestic product (GDP) data was bleaker than expected and didn’t lend much sympathy to growth stocks,” said Sophie Land-Yates at Hargreaves Lansdown. “To that end, the market’s reaction to this result will be even more important than usual.”
Investors have shown they are excited about the promise of AI, but in the meantime they want tech companies to remain focused on revenue and profits.
Like other big technology companies, Alphabet has been pouring money into developing AI, a strategy that has helped drive demand for its cloud services. Google ranks third in the cloud computing market behind Amazon.com and Microsoft, but its AI capabilities could help close the gap.
During that time, Microsoft has implemented AI technology from partner OpenAI across its product line. This bet is starting to pay off, with some customers adding AI tools to their Office productivity software to summarize documents and generate new content, or signing up for Azure cloud subscriptions with OpenAI products.
“Overall, both results show that the innovation economy continues to benefit from rising corporate spending and strong consumer demand,” said Tejas Desai of Global XETF.
The S&P 500 pared most of its losses ahead of the close of regular trading, helped by gains in two other leading companies, Nvidia and Tesla. Meanwhile, U.S. Treasuries were sold off, pushing yields to new 2024 highs as economic indicators “return to strength.” “Stagflation” chatter — adds more uncertainty to the Federal Reserve’s policy path. Swap traders postponed the first rate cut until December.
“This report is the worst in terms of slowing economic growth and continuing inflationary pressures,” said Chris Zaccarelli of the Independent Advisor Alliance. “The Fed wants inflation to start falling sustainably, but the market wants economic growth and corporate profits to rise.”
Evercore’s Krishna Guha said the Fed’s tone should tighten slightly next week after the latest economic data. “Until we get a more accurate reading of future inflation trends, the Fed will continue its holding pattern of cycling through airports,” he said.
“These numbers will certainly raise the topic of stagflation, but as long as the labor market remains this strong, I’m not too concerned about such an outcome,” said Ian Lingen of BMO Capital Markets. said.
Company highlights:
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American Airlines Group Inc. said delays due to bad weather and air traffic congestion weighed on its results at the beginning of the year, but it expects profits to recover as it heads into the busy summer season.
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Southwest Airlines is ending operations at four airports and implementing a voluntary furlough to deal with “significant challenges” caused by slowing growth and declining deliveries of Boeing aircraft.
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Airbus SE plans to further increase production of its state-of-the-art A350 widebody jet, benefiting from a surge in long-haul travel demand and the crisis involving arch-rival Boeing Co.
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Royal Caribbean Cruises has revised its full-year profit forecast upward as demand for cruises continues to rise, leading to record price increases.
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Caterpillar Corp. reported in its first quarter results that machine sales were down year-on-year, and warned that this trend is expected to continue in the second quarter.
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Comcast Corp. reported a higher-than-expected decline in Internet subscribers.
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Weak sales at International Business Machines’ consulting division disappointed investors and overshadowed its acquisition of software company Hashicorp.
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Ford Motor Co. has rapidly restructured its electric vehicle strategy amid a slowdown in the plug-in market and reported better-than-expected first-quarter results on strong sales of work trucks.
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Nasdaq’s profits fell by the most in 14 years as companies continue to wait for economic stability before going public.
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Merck & Company raised its full-year profit and sales forecasts as its blockbuster cancer drug Keytruda continues to dominate the treatment field.
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Harley-Davidson’s first-quarter sales beat expectations despite high borrowing costs and tight consumer budgets.
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First Citizens Bancshares, which bought Silicon Valley Bank after it collapsed last year, raised its 2024 loan revenue outlook.
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Hertz Global Holdings posted a loss nearly three times more than analysts expected as it accelerated sales of electric vehicles to reduce its fleet of Tesla Inc models that have weighed on profits over the past year.
This week’s main events:
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Japan interest rate decision, Tokyo CPI, inflation and GDP forecast, Friday
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US Personal Income and Expenditures, PCE Deflator, University of Michigan Consumer Sentiment, Friday
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ExxonMobil, Chevron earnings, Friday
The main movements in the market are:
stock
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As of 4 p.m. New York time, the S&P 500 was down 0.5%.
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Nasdaq 100 falls 0.5%
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The Dow Jones Industrial Average fell 1%.
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MSCI World Index falls 0.5%
currency
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Bloomberg Dollar Spot Index little changed
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The euro rose 0.3% to $1.0729.
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The British pound rose 0.4% to $1.2513.
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The Japanese yen fell 0.2% to 155.63 yen to the dollar.
cryptocurrency
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Bitcoin rises 1% to $64,705.41
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Ether rose 1% to $3,161.87
bond
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The 10-year Treasury yield rose 6 basis points to 4.70%.
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Germany’s 10-year bond yield rose 4 basis points to 2.63%.
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The UK 10-year bond yield rose 3 basis points to 4.36%.
merchandise
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West Texas Intermediate crude rose 1.2% to $83.77 per barrel.
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Spot gold rose 0.7% to $2,332.94 an ounce.
This article was produced in partnership with Bloomberg Automation.
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