Market Update: US Equities Bounce on Big-Tech Earnings, Cryptocurrencies Hold Steady

US Equities Rally on Positive Big-Tech Earnings Despite Persistent Inflation Concerns

In a surprising turn of events, US equities bounced back on Friday as positive big-tech earnings reports overshadowed concerns about persistent inflation. The Federal Reserve’s preferred inflation measure showed prices increased 2.7% year-over-year in March, slightly higher than analysts’ expectations of a 2.6% increase.

Despite this inflation data, the S&P 500 and Nasdaq Composite indexes were trending 1% and 2% higher, respectively, midway through Friday’s session. Analysts attribute this rally to strong earnings reports from tech giants Alphabet and Microsoft, with shares up 10% and 3%, respectively.

“The share price reaction, although relatively muted, isn’t to be sniffed at,” analysts at Hargreaves Lansdown noted in a report on Microsoft stock. “The recent GDP reading from the US was bleaker than expected, and didn’t lend itself well to growth-stock sympathism. To that end, the market’s reaction to these results mean more than in usual times.”

Tech and growth stocks have been underperforming recently, leading to increased yields, so a correction was due, according to Tom Essaye, founder of Sevens Report Research.

Meanwhile, cryptocurrencies remained relatively stable on Friday after a tumultuous week. Bitcoin was up 0.4% to around $63,600, while ether dipped 0.3% to $3,100. Bitcoin, which reached as high as $67,200 earlier in the week, is now down about 1.5% since the halving, while ether has managed to stay in the green, gaining just under 1% in the past seven days.

Traders are now looking ahead to next week’s rate decision from the Fed, which will be announced on Wednesday. With the latest inflation numbers, Fed fund futures are showing a 3% chance of a rate cut, down from 6% odds recorded on Thursday.

“While the March PCE report was only slightly higher than expectations on a year-over-year basis, inflation is proving to be stickier than expected and the idea of ‘reflation’ is taking hold,” said Bret Kenwell, US investment analyst at eToro. “That doesn’t mean inflation will surge, but it’s one more argument to hold off on rate cuts.”

Overall, the market’s reaction to the positive big-tech earnings and the persistent inflation concerns sets the stage for an interesting week ahead in the financial markets.