Tech Titans Propel Market Rebound: Alphabet and Microsoft Earnings Boost Investor Confidence

US stock market experienced a surge on Friday, propelled by stellar earnings reports from industry behemoths Alphabet and Microsoft. Despite concerns over sticky inflation, investors found renewed optimism in the prospects of a Big Tech-led market rally.

The S&P 500 index rose by approximately 0.6%, while the tech-heavy Nasdaq Composite climbed 1.4%. Conversely, the Dow Jones Industrial Average, with its lesser exposure to tech stocks, saw marginal gains, reflecting the diverse performance across sectors.

Alphabet's stock witnessed an impressive surge of around 12% in premarket trading following the company's announcement of its first-ever dividend and a significant stock buyback. Meanwhile, Microsoft's stock surged by 4% after surpassing Wall Street's expectations for third-quarter revenue and profit, driven by robust AI adoption within its cloud services.

The notable performance of these tech giants reignited confidence among investors, buoying hopes that earnings from the broader "Magnificent Seven" tech companies could uplift the entire market. This sentiment was particularly encouraging following Meta's disappointing forecast earlier in the week.

However, amidst the positive earnings reports, investors also scrutinized the latest reading of the Federal Reserve's preferred inflation gauge, the personal consumption expenditures price index for March. While the core measure of the index, which excludes food and energy costs, surpassed economists' expectations with a 2.8% increase over the previous year, concerns lingered about achieving the Fed's 2% inflation target on a sustainable basis.

Nevertheless, investors largely remained undeterred, brushing aside inflation worries as they focused on the potential for another Big Tech-driven rally to mitigate broader uncertainties surrounding Federal Reserve policies.

In other market movements, shares of Snap surged by 25% during morning trading, fueled by optimism over the company's digital advertising business overhaul. Additionally, Rubrick's stock soared by 16% to $37, reflecting investor enthusiasm for another AI-focused company debut.

Looking ahead, analysts are closely monitoring the spending trends related to AI buildouts at major tech companies, particularly after Microsoft and Alphabet echoed a similar sentiment of increased expenditure in their recent earnings reports. Despite these concerns, the market remains poised for further developments as investors navigate the evolving landscape of tech-driven growth and economic indicators.

Also Read: Wall Street Poised for Gains on Tech Surge and Positive PCE Data