Stocks surged Friday afternoon as investors await developments in Washington, D.C. on debt ceiling deliberations and digest the latest corporate earnings as a new wave of AI optimism boosts tech stocks.
All three major indexes closed higher as the Nasdaq moved higher.
The S&P 500 (^GSPC) closed 1.3% higher, the Dow Jones Industrial Average (^DJI) rose more than 300 points (1%), and the tech-rich Nasdaq Composite Index (^IXIC) rose more than 2%. Rose.
The Nasdaq and S&P 500 both posted weekly gains on Friday’s gains.
Reuters reported Friday morning that President Joe Biden and House Speaker Kevin McCarthy were “close to an agreement” to extend the government debt ceiling for two years.
“Negotiators appear to be nearing a deal,” Goldman Sachs’ economic research team led by Jan Hadzius wrote in a note to clients Thursday night.
“It is difficult to predict when the announcement will be made, but we think the deal is most likely to be announced later on Friday (May 26) or on Saturday (May 27). If so, this will likely allow for a House vote later on Tuesday.” “(May 30) or Wednesday (May 31). The Senate will also need to pass the deal, but procedural hurdles It is unlikely to prevent timely enactment,” they added.
The Nasdaq rebounded to close 1.7% higher on Thursday as Nvidia’s (NVDA) quarterly crash sent shares of the semiconductor giant up more than 24%.
Earnings continued to drive stocks on Friday morning.
Shares of Marvell Technologies (MRVL) surged more than 30% on Friday as the chipmaker joined Nvidia to share positive news about artificial intelligence. Marvel believes AI revenue could double next year.
“AI is emerging as a key growth driver for Marvel,” Marvel CEO Matt Murphy said on the company’s earnings call. “While we are still in the early stages of our AI launch, we expect his AI revenue in fiscal 2024 to at least double his previous year and continue to grow rapidly over the next few years.”
Chip names like Broadcom (AVGO), Ambarella (AMBA), Skyworks (SWKS) and Micron (MU) were all up more than 5% on Friday. The PHLX semiconductor index (^SOX) also rose by more than 5%.
On the other earnings front, Gap (GPS) shares rose more than 10% after the apparel retailer posted a surprise profit late Thursday. Meanwhile, Ulta Beauty’s (ULTA) stock jumped 13% after warnings of slowing growth, even though the company beat Wall Street expectations for first-quarter sales and earnings per share. fell.
“Growth in the category is healthy, but moderated after two years of unprecedented growth,” Ulta CEO Dave Kimbell said on the company’s earnings call. We’re also seeing an increase in promotional activity as category growth normalizes.”
In terms of economic indicators, the PCE price index, the Fed’s preferred inflation indicator, outperformed expectations, overturning market expectations for the Fed’s next policy announcement on June 14.
Core PCE rose to 4.7% y/y in April, beating economists’ expectations of a 4.6% rise and accelerating from the 4.6% annualized rise seen in March. Investors see a 58% chance of another 0.25% rate hike by the Fed next month following the announcement, according to data released by CME Group as of Friday morning.
Ryan Sweet, chief US economist at Oxford Economics, said Friday that “we remain firm in our view that the Fed will keep rates on hold for the rest of the year.” “However, it is becoming more likely that the Federal Funds rate forecast for 2024 will be revised, reducing the number of rate cuts.”
Data on personal income and spending also showed that consumers remained resilient in April, with spending rising 0.8% last month, beating economists’ expectations for a 0.3% rise. Durable goods orders also had unexpected results, with preliminary figures for April showing an increase of 1.1% last month. Economists had expected the data to show a 1% decline.
However, May consumer sentiment data released by the University of Michigan showed that the debt ceiling conflict hurt many Americans’ economic outlook, with sentiment down 4 percentage points from April.
“Consumer sentiment plunged 7% on concerns about the future of the economy, wiping out nearly half of the gains achieved after hitting a historic low since June last year,” said Joanne Hsu, director of consumer research. ‘ said.
“The drop mirrors the debt ceiling crisis of 2011, when sentiment also plummeted. Western and middle-income consumer sentiment fell sharply this month. Outlook for the economy has plunged 17% since last month.”
Josh is a reporter for Yahoo Finance.
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