The tech sector was the star of this friday, as Meta Platforms, Amazon, Nvidia and Microsoft all reported better-than-expected earnings and saw their shares soar to new highs.
Meta Platforms, formerly known as Facebook, surged 20.3% to close at $474.99, after announcing a record profit, a $50 billion share buyback program and its first-ever cash dividend.
Amazon, the e-commerce behemoth, rose 7.9% to close at $3,841.95, after posting solid results for its latest quarter and revealing that its founder Jeff Bezos will step down as CEO later this year.
Nvidia, the chipmaker, jumped 5% to close at $661.57, after beating analysts’ estimates and raising its revenue outlook for the current quarter.
Microsoft, the software giant, gained 1.8% to close at $411.22, after reporting its second-highest quarterly revenue ever and growing its cloud business.
These four companies added more than $300 billion to their combined market value on Friday, boosting the Nasdaq Composite index, which tracks the performance of tech stocks, by 1.7% to close at 14,095.47.
The broader S&P 500 index, which measures the performance of the largest US companies, also rose 1.1% to close at 3,886.83, reaching a new record high.
US economy shows resilience
The tech rally was also supported by the upbeat news from the US economy, which added 353,000 jobs in January, far exceeding the expectations of 176,500 jobs, according to the latest data from the Bureau of Labor Statistics.
The unemployment rate fell to 5.7%, the lowest level since the pandemic began, and the labor force participation rate increased to 61.4%, indicating that more people are looking for work.
The strong jobs report also pushed up the yields on US Treasury bonds, which reflect the expectations of future interest rates and inflation. The yield on the 2-year Treasury note rose to 4.37%, up from 4.19% on Thursday, according to Tradeweb.
The higher yields signaled that investors are less likely to expect the Federal Reserve to cut interest rates in the near future, as the economy shows signs of recovery. The Fed has kept its benchmark interest rate at a 23-year low of 0.25% since March 2020, and has pledged to maintain it until the economy reaches full employment and inflation stabilizes at 2%.
However, some analysts believe that the Fed may start to reduce its stimulus measures sooner than expected, as the economy improves and inflation pressures build up.
“Clearly, May 1st is the earliest month that the Fed will commence cutting key interest rates. Then hopefully the Fed will have additional key interest rate cuts at its meetings in June, July and September,” wrote Louis Navellier, chairman of Navellier & Associates, in a note Friday.
According to the CME FedWatch Tool, which tracks the market’s expectations of the Fed’s actions, the probability of a rate cut in March fell to 21%, down from 46% last week.
Other market movers
Not all sectors of the market shared the same optimism as the tech sector. The Dow Jones Industrial Average, which tracks the performance of 30 blue-chip companies, rose only 0.4% to close at 31,148.24, lagging behind the other major indexes.
The equal-weighted S&P 500 index, which gives each stock the same weight regardless of its size, fell 0.8% on Friday, indicating that the market rally was driven by a few large companies.
The Russell 2000 index, which tracks the performance of small-cap stocks, also declined 0.5% on Friday, after reaching a record high on Thursday.
Next week, investors will be paying attention to the testimony of US Secretary of the Treasury Janet Yellen before the Senate Banking Committee, in the wake of the regional banking crisis that erupted last year.
They will also be looking for clues about the health of the US financial system, after New York Community Bancorp, one of the largest regional banks in the country, reported a surprise $252 million loss in the fourth quarter, due to a surge in loan defaults and provisions.
As the stock market closes for the weekend, the prices may change slightly.
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