Stocks Rise as Amazon Drives Gains in Major Indices
U.S. stock markets finished higher on Friday, with the S&P 500 Index rising by 0.70%, the Dow Jones Industrial Average increasing by 0.53%, and the Nasdaq 100 climbing 0.60%. This upward trend was largely driven by Amazon.com, which saw its shares surge more than 15% after reporting the fastest quarterly revenue growth in its cloud division in five years. The positive performance reassured investors about Amazon's capital spending plans and the ongoing global AI expansion.
Despite the market rally, bond yields rose sharply, with the 10-year Treasury note yield reaching a 1.5-year high of 4.75%. This increase followed hawkish comments from Dallas Fed President Lorie Logan, who indicated that inflation could remain above target without policy restraint. On the economic front, the U.S. reported stronger-than-expected data, including a 0.9% rise in the Q2 employment cost index and a surprising increase in the July MNI Chicago PMI to 57.6.
However, the market faced headwinds from a significant 9% drop in Apple shares after the company reported disappointing service revenue and a weaker-than-expected forecast. This decline in Apple, a major player in the tech sector, contributed to a mixed sentiment among technology stocks.
Internationally, stock markets also closed higher, with the Euro Stoxx 50 reaching a 3.5-week high and Japan's Nikkei-225 gaining 4.03%. Meanwhile, crude oil prices rose more than 1%, despite ongoing tensions in the Middle East, particularly concerning Houthi threats against Saudi ports and U.S. maritime blockades.
Earnings reports continued to support market optimism, with forecasts suggesting a 23% increase in Q2 earnings for S&P 500 companies, driven largely by AI-related spending. So far, 86% of the 291 S&P 500 companies that have reported earnings have exceeded expectations.
In the bond market, September 10-year T-notes closed down 17.5 ticks, reflecting pressure from strong economic reports and rising inflation expectations. European government bond yields also increased, with the 10-year German bund yield rising to 3.206%.
The Magnificent Seven technology stocks, excluding Apple, saw gains, with Amazon leading the way. Other tech giants like Alphabet and Microsoft also posted significant increases. In contrast, cryptocurrency-related stocks faced challenges as Bitcoin fell over 2%, leading to declines in companies like Coinbase and Riot Platforms. Overall, the market's mixed signals reflect a complex interplay of strong earnings, economic data, and geopolitical tensions that continue to shape investor sentiment.
