US Futures Jump, Spurred by Stellar Alphabet, Microsoft Earnings

U.S. stocks rebounded on Friday as earnings from Alphabet ( GOOG , GOOGL ) and Microsoft ( MSFT ) renewed hopes for a big tech-led rally, even as a reading of the Federal Reserve's preferred inflation measure showed price pressures lingering.

S&P 500 (^GSPC) futures rose roughly 0.9%, while tech-heavy Nasdaq 100 (^NDX) contracts rose 1%. Futures for the Dow Jones Industrial Average ( ^DJI ), which covers fewer tech stocks, rose 0.3%.

Profits for Alphabet and Microsoft rose 11% and 4%, respectively, after Thursday's sell-off, lifting shares. The “Magnificent Seven” duo's stellar results showed strong AI demand boosted cloud revenue — and the opportunity for both to benefit from that boom.

That fueled hopes that earnings from Magnificent Seven Technologies would lift the broader market out of the doldrums — a knock from META's ( META ) disappointing forecast earlier in the week.

At the same time, the market took in the latest reading of the central bank's preferred inflation gauge, the Personal Consumption Expenditure Price Index for March. The “key” measure in the report, which strips out the cost of food and energy, rose 2.8% from a year ago, above estimates of 2.7% but unchanged from the year-ago increase.

The reading comes as Wall Street aggressively downgraded expectations for Fed rate cuts this year. Already, since the beginning of the year, traders have adjusted their bets seven to one.

In other individual moves, Snap ( SNAP ) shares jumped 26% in premarket trading, as Wall Street welcomed signs that a restructuring of its digital advertising business was finding takers in its after-hours report.

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  • Second day of trading for AI play Rubrik

    Shares of Rubric ( RBRK ) rose 16% to $37 at the end of a rocky day on Wall Street on Thursday, as did appetite for Reddit's ( RDDT ) newly issued shares, a sizzling response to another AI ecosystem play on its IPO day. A few weeks ago.

    Stocks are seen rising in today's pre-market.

    But Rubrik's market response is a sidebar to the story co-founder and CEO Bibul Sinha shared with me at the NYSE.

    Sinha founded Rubrik in 2014, working in coffee shops at Google and YouTube offices in an effort to hire top developer talent.

    He made no secret of his humble upbringing in India, which fueled his business building.

    “Thinking maximally is how I lifted myself out of poverty,” Sinha wrote in a letter to the company's IPO prospectus.

    “He's the American dream come true.” Ravi Madre, co-founder and partner at Lightspeed Venture Partner told me.

    Below is our chat on Yahoo Finance Live.

  • Here's what analysts at Microsoft, Google & Meta are talking about

    Many on Wall Street are unnerved by the costs associated with AI buildouts at big-cap tech companies.

    Meta ( META ) kicked off these concerns earlier in the week, calling for a potential commodity hike in spending this year and in 2025. Shares immediately re-priced that capacity, falling 10.5% on Thursday.

    Last night, we heard the same free-spending vibe from Microsoft ( MSFT ) and Alphabet ( GOOGL ) — though those quarters were good enough to mask spending concerns.

    A couple of comments from the street below on this topic caught my eye this morning.

    Jefferies on Alphabets CAPEX:

    “The $12.0 billion figure was nearly double from $11.0 billion in Q4 to $6.3 billion in 1Q23. Management is guiding future quarterly capex to be at or above Q1 levels. We now model 2024 capex of $49.7 billion, up 54% year-over-year. AI technology architectures, particularly AI/SGE responses are down 80% since launching a year ago, while Google focuses heavily on servers and data centers, offices, and machine costs while offices are <10% higher."

    Guggenheim on Microsoft's capex:

    “Management indicated that capex will increase significantly in F4Q driven by cloud and AI infrastructure, but no numerical guidance was provided. Also, management said that FY25 capex will be higher than FY24 capex. We are currently modeling FY24 capex at $53.4 billion, up nearly 70% from FY23.” And FY25 capex growth of 20% to $64.0 billion, big numbers flowing through cost of goods sold over time, though it will be used for Azure (and copilot) growth.”

    Cost overruns are proving to be the hidden killer of AI trading.

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