Google And Microsoft To The Rescue

Key Takeaways

• Google And Meta Earnings
• PCE Report In Line With Expectations
• Amazon And Apple Earnings Next Week

Following a day where major indices saw significant losses early, but recovered late in the day, markets are poised for a strong open Friday. On Thursday, the S&P 500 dropped 0.5% while the Nasdaq Composite lost 0.6%; however, indices had been sharply lower following earnings reports from Facebook parent Meta Platforms Meta Platforms and IBM IBM .

Shares of Meta had their worst day since 2022, falling 10%. IBM was down more than 8% for the day. The earnings news was exacerbated by a weaker than expected reading on first-quarter GDP which came in at just 1.6%. That was well below expectations of 2.5% and led to fears the economy might be slowing while inflation remains stubbornly high, commonly known as stagflation. But a couple positive earnings reports after the close quickly turned things around and some good economic news this morning, in the form of the Personal Consumption Expenditures (PCE) Index, seems poised to get markets off to a good start.

After the close on Thursday, we had a change in tone, both Google Google parent Alphabet and Microsoft Microsoft reported earnings. The companies delivered better than expected reports and provided optimistic outlooks. In the case of Google, the company also announced a $0.20 dividend. Meantime, Microsoft said Artificial Intelligence (AI) now makes up 7% of their Azure growth, up from 6% and furthering enthusiasm for AI's possibilities. Also higher after the close was Snapchat. The social media company beat and provided an optimistic outlook sending shares higher by 27%. And shares of Colgate Palmolive are up over 2.5% in premarket. The company beat on first quarter earnings and also raised guidance.

On the other side of the coin are Intel Intel , Exxon and Chevron. Intel, which has been a major tech disappointment, reported earnings after the close last night that were better than expected but issued a disappointing forecast. Intel is down over 8% in premarket. Shares of Exxon Mobil and Chevron are both lower. Falling margins in the refining business and continued low natural gas prices plagued both companies. Shares of Exxon are lower by 1.5% while Chevron shares are down over 1%.

The earnings news seems to be good so far, which is something I've harped on quite a bit. I think it's crucial that earnings pick up any residual slack resulting from dimming hopes for a rate cut anytime soon. This morning's PCE report showed core prices increased 0.3% on a month-over-month basis, in line with forecasts. However, year-over-year, core prices were up 2.8% vs. expectations of 2.6%. Still, those numbers remain below 3%, which would be a point at which inflationary fears and possibly even rate hikes might take over. At their current levels, I think it's unlikely we'll see an interest rate cut in the near future. At the same time, we're at a healthy level of economic growth with inflation in check, making a good environment for earnings growth.

For today, I am watching to see if we can hold premarket gains. That would be a positive sign the bears have lost their grip from earlier in the week. It would also give bulls some momentum heading into another big week of earnings and economic data. Amazon Amazon and Apple Apple are just two of the bigger names we'll hear from next week. On the economic calendar, we'll get a number of data points, highlighted by next Friday's employment report. As always, I would stick with your investing plan and long term objectives.

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