Stocks Surge, Tech Rallies On Strong Earnings, Inflation Softens: What's Driving Markets Friday?

After the burst of volatility on Thursday, stocks rebounded on Friday due to several positive factors, including reduced concerns about a shift in the Bank of Japan’s policy, strong corporate earnings and a inflation report indicating a further cooling of price pressures in June.

Intel Corp. INTC and Roku, Inc. ROKU are among the stocks that got a strong boost after their earnings reports.

Cues From Friday's Trading:

The S&P 500 Index rose by 1%, nearly recovering all the losses experienced on Thursday. The Dow Jones rose 0.6%.

The Nasdaq 100 rallied 1.9%, erasing the losses of a day earlier. Small caps stocks in the Russell 2000 gained 1.5%.

US Index Performance On Friday

Analyst Color:

The U.S. economy may prove more resilient in the second half of 2023 than many forecasters had expected, according to Morgan Stanley's Ellen Zenter. “Our forecast for GDP growth shows that the economy is not declining enough for the Federal Reserve to start cutting rates,” she said.

Core inflation and job creation, however, are moving in the right direction. This, the analyst said, strengthens the case for a soft landing for the U.S. economy in 2023. 

“As a result, we continue to believe that the federal funds rate has peaked this year at 5.375% (the midpoint of the 5.25%-5.5% range announced on July 26), with the first cut coming in March 2024.”

Friday’s Trading In Major US Equity ETFs: In midday trading on Friday, the SPDR S&P 500 ETF Trust SPY was 1% higher to $457, the SPDR Dow Jones Industrial Average ETF DIA rose 0.6% to $354.9 and the Invesco QQQ Trust QQQ was 1.8% higher to $383, according to Benzinga Pro data.

Almost all U.S. equity sectors were positive, except for the Energy Select Sector SPDR Fund XLE and the the Utilities Select Sector SPDR Fund XLU.

The Communication Services Select Sector SPDR Fund XLC outperformed, up 2.1%, followed by the Consumer Discretionary Select Sector SPDR Fund XLY, up 1.7%, and the Technology Select Sector SPDR Fund XLK, up 1.4%.

Latest Economic Data:

In June 2023, personal spending experienced a growth of 0.5%, surpassing market expectations of a 0.4% expansion. This increase also marked an acceleration from the revised 0.2% rise observed in the previous month.

In June 2023, the core PCE price index, considered the Federal Reserve’s preferred gauge for measuring inflation, fell from 4.8% to 4.1%. This rate was the lowest since September 2021 and fell slightly below market expectations of 4.2%. The PCE inflation fell from 3.8% to 3% year-on-year in June 2023, the lowest reading since March 2021, in line with forecasts.

The University of Michigan consumer sentiment for the U.S. was revised lower to 71.6 in July 2023, from a preliminary reading of 72.6.

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Stocks In Focus:

• Ford Motor Co. F fell over 4% after it pushed out electric vehicle adoption goals despite a beat-and-raise quarter.
• Intel rallied about 6% and Roku climbed close to 25%, while Enphase Energy, Inc. ENPH tumbled close to 10% following its earnings release. First Solar, Inc. FSLR climbed 3% and KLA Corp. KLAC rose over 5%, also in reaction to quarterly reports.
• Exxon Mobil Corp. XOM fell 1.7% after missing revenue estimates.
• AstraZeneca plc AZN rose nearly in 5% in reaction to its earnings report.
• Procter & Gamble Co. PG rose 2.7% after reporting better than expected results.
• Lucid Group Inc. LCID rose 7.3% amid bullish momentum in the EV space.

Commodities, Bonds, Other Global Equity Markets:

Crude oil held steady, with a barrel of WTI-grade crude trading at $79.55. The United States Oil Fund ETF USO was flat at $71.50. Oil is on track to mark its fifth straight week of gains, a stretch last seen in early 2022.   

Treasury yields softened, with the 10-year yield down by 3 basis points to 3.97% and the two-year yield down by 3 basis points to 4.9%. The iShares 20+ Year Treasury Bond ETF TLT was 0.3% higher for the day. 

The dollar eased, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.1%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.5% higher to 1.1027.

European equity indexes closed in the green. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 1.7%. 

Gold rose 0.8% to $1,961/oz. The SPDR Gold Trust GLD was 0.9% higher to $182. Silver rose 1% to $24.40, with the iShares Silver Trust SLV up 1.1% to $22.40. Bitcoin BTC/USD was up by 0.3% to $29,321.

Staff writer Piero Cingari updated this report midday Friday. 

Photo via Shutterstock.