US stocks finished higher for the second consecutive week despite a series of earnings that caused investors to shed shares of some of the world’s biggest tech companies.
The benchmark S&P 500 index closed 2.5 per cent higher on Friday, taking its weekly gain to 4 per cent. The tech-heavy Nasdaq Composite rallied 2.9 per cent, for a weekly advance of 2.2 per cent. Both indices had back-to-back weekly gains for the first time since August.
Stocks finished up on Friday helped by Apple. Shares in the iPhone maker had their biggest one-day gain in more than two years, closing up 7.6 per cent, after it reported $90.1bn in revenues for the September quarter, an 8 per cent increase year-on-year. That beat forecasts of $88.9bn and compared with $83.4bn a year ago, according to Refinitiv.
Offsetting that, shares of Amazon finished 6.8 per cent lower after it warned late on Thursday that consumer spending was in “uncharted waters”. The Big Tech group, seen as a modern-day bellwether for the US economy, said it expected revenues to come in between $140bn-$148bn in the fourth quarter — as much as $15bn less than the figure forecast by analysts.
The announcement from Amazon extended a surprisingly weak earnings season from big US tech companies, defying hopes that they would be more resilient to a challenging economic backdrop. Shares in Microsoft, Alphabet and Facebook-owner Meta tumbled midweek as rising costs and slowing economic growth took a toll on earnings.
Meta lost 23.7 per cent over the week, while Amazon fell 13.3 per cent.
Still, Jeff O’Connor, head of market structure for the Americas at Liquidnet, said money was likely to pour into stocks once inflation and interest rates had clearly peaked. “We’re looking at cash levels for money managers at highs that we haven’t seen in 20 years,” O’Connor said. “When money starts to rotate back into the equity market, it’s going to be explosive.”
The Federal Reserve has led the charge on tightening monetary policy aggressively this year in a bid to curb inflation. The central bank has raised interest rates by an extra-large 0.75 percentage points at each of its past three meetings to a target range of 3 per cent to 3.25 per cent. Markets are pricing in an increase of similar magnitude for November.
Data on Thursday showed that the US economy expanded by a greater than expected 2.6 per cent on an annualised basis in the third quarter, having contracted over the first six months of the year. However, the headline figure concealed a softening of domestic consumer demand.
Meanwhile, the Fed’s preferred inflation metric, the core personal consumption expenditures index rose 0.5 per cent month on month for September, in line with economists’ expectations and down from 0.6 per cent in August. The latest employment cost index — which tracks employers’ spending on pay — was also in line with forecasts, rising 1.2 per cent during the third quarter.
Joshua Shapiro, chief US economist at MFR consultancy, said the ECI report “plays into the Fed’s belief that the labour market remains overly tight and is contributing to upwards pressure on inflation”.
In government bond markets, the yield on the 10-year US Treasury note added 0.07 percentage points to 4.01 per cent as its price fell. The yield on the 10-year German Bund rose 0.11 percentage points to 2.1 per cent.
The moves came a day after the European Central Bank raised interest rates by 0.75 percentage points for the second consecutive meeting in an attempt to damp rapid price growth.
Elsewhere in equity markets, Europe’s Stoxx 600 closed 0.1 per cent higher. Chinese stocks fell sharply, resuming a descent that began after President Xi Jinping tightened his grip on power at the Communist party congress last weekend. Hong Kong’s Hang Seng index lost 3.7 per cent.