Tech stocks led a broad rally on Wall Street on Friday, capping another strong week for the market, as investors hailed strong earnings from Apple and other companies.
The S&P 500 rose 2.5% and posted its first consecutive weekly gains since August. The Dow Jones Industrial Average rose 2.6% and the tech-heavy Nasdaq composite climbed 2.9%. Small company stocks also gained ground, pushing the Russell 2000 Index up 2.3%.
Apple’s latest quarterly results showed the iPhone maker made even bigger profits over the summer than expected. Its shares rose 7.6% and led a rally in tech stocks that had been heavily beaten a day earlier.
Intel jumped 10.7% after profiting much better than analysts had expected, although it said it saw “worsening economic conditions”.
Gilead Sciences climbed 12.9% and T-Mobile US gained 7.4% after also beating Wall Street earnings expectations.
Investors were also encouraged by a consumer spending report released a day after new data showed the economy grew slightly in the third quarter and inflation eased.
“You have an economy that almost refuses to collapse, an economy that is basically resilient, but at the same time inflation is coming down and that’s what the Fed wants and that’s obviously what the market wants” said Quincy Krosby, chief equity strategist for LPL Financial.
That has helped fuel hopes on Wall Street of a Federal Reserve “pivot,” where the central bank is scaling back the sharp interest rate hikes that have rattled the market. Such a move could boost the market, although many analysts say such hopes could be overblown.
The central bank has been very clear about its intention to go too far in order to rein in inflation, which means big gains on pullback hopes seem premature, said Liz Young, chief investment strategist at SoFi.
“This rally has now become a bit irrational and fragile at this level,” Young said.
The S&P 500 rose 93.76 points to 3,901.06. The Dow gained 828.52 points to 32,861.80. The Nasdaq gained 309.78 points to 11,102.45. The Russell 2000 gained 40.60 points at 1,846.92.
Many large US companies reported higher-than-expected earnings, although the bag remains decidedly mixed.
Friday’s strong earnings helped offset a 6.8% decline for Amazon, which offered a weaker-than-expected forecast for future revenue. It’s the latest Big Tech company to take a beating this week after reporting discouraging trends. It’s a sharp turnaround after the group dominated Wall Street for years with seemingly unstoppable growth.
Earlier in the week, Meta Platforms lost nearly a quarter of its value after posting a second straight quarter of revenue declines amid falling ad sales and fierce competition from TikTok. Microsoft and Google’s parent company also reported slowdowns in key areas.
Such woes have created a sharp split on Wall Street this week, between lagging Big Tech stocks and the rest of the market. The Nasdaq, which is full of high-growth tech stocks, posted a 2.2% gain this week. It would have performed even worse had it not been for Apple’s boost from Friday. The Dow, meanwhile, jumped 5.7% for the week as it places less emphasis on technology.
Rising interest rates hit Big Tech stock prices harder than the rest of the market, and the pressure mounted on Friday as yields rose.
“Markets still seem unwilling to believe that we could end up in a place where an earnings recession is possible,” Young said.
Data released in the morning showed increases in wages and other compensation for American workers over the summer were in line with economists’ expectations. This should keep the Fed on track to continue raising rates sharply in hopes of weakening the labor market enough to reduce the country’s high inflation. Other data showed that the Fed’s preferred inflation measure remains very high and that US households continue to spend more despite this.
The Fed is trying to starve inflation of the purchases made by households and businesses needed to keep it high. It does this by intentionally slowing down the economy and the job market. The worry is that it could go too far and cause a big drop.
The Fed has already raised its benchmark overnight interest rate to a range of 3% to 3.25% from virtually zero in March. He is widely expected to push through another increase that is triple the usual size next week, before he potentially makes a smaller increase in December. Not only do higher rates slow the economy, but they also hurt stock prices and other investments.
The two-year Treasury yield, which tends to track expectations for Fed action, rose to 4.42% from 4.28% late Thursday.
The 10-year yield, which helps set rates on mortgages and many other loans, fell to 4.01% from 3.93%.
Trading in Twitter shares ended after Elon Musk took control of the company following a lengthy legal battle.
Associated Press writers Elaine Kurtenbach, Matt Ott and Mari Yamaguchi contributed.
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