US stock indices concluded Friday’s trading session higher, with the S&P 500 Index ($SPX) advancing +0.70%, the Dow Jones Industrial Average ($DOWI) gaining +0.53%, and the Nasdaq 100 Index ($IUXX) climbing +0.60%. Both the S&P 500 and Nasdaq 100 achieved 1-week highs, largely propelled by a significant surge in Amazon.com, which bolstered overall market sentiment.
Amazon.com (AMZN) was a standout performer, surging more than +15% to lead megacap technology stocks. The e-commerce and cloud giant reported Amazon Web Services (AWS) net sales of $42.23 billion, exceeding the consensus estimate of $40.57 billion. This strong performance in its cloud unit marked the fastest quarterly revenue growth in five years for Q2, reassuring investors about the returns on its projected capital spending and the sustained global AI buildout. Other prominent technology stocks also saw substantial gains, with Alphabet (GOOGL) closing up over +6%, and Microsoft (MSFT), Meta Platforms (META), and Nvidia (NVDA) each rising more than +3%. Tesla (TSLA) also posted a gain of +0.76%. In contrast, Apple (AAPL) was a notable drag on the technology sector, plunging more than -9% after reporting disappointing Q3 service revenue of $30.74 billion, below the $31.36 billion consensus, and weaker Q3 Greater China revenue of $18.82 billion, missing the $19.58 billion consensus. The company also issued a weaker-than-expected revenue forecast.
The market’s rally unfolded despite a series of stronger-than-expected US economic reports and hawkish comments from Federal Reserve officials, which typically exert upward pressure on bond yields and can weigh on equities. The 10-year T-note yield, for instance, jumped to a 1.5-year high of 4.75% on Friday, closing up +6.8 basis points at 4.741%. Key economic data included the US Q2 employment cost index, which rose +0.9%, surpassing expectations of +0.8%. The July MNI Chicago PMI unexpectedly increased by +0.9 to 57.6, stronger than the anticipated decline to 56.0. Furthermore, the University of Michigan US July consumer sentiment index was unexpectedly revised upward to a 5-month high of 55.2, exceeding expectations for a downward revision to 54.0.
Dallas Fed President Lorie Logan’s hawkish remarks contributed to the upward movement in bond yields. Logan stated, "Without any policy restraint, inflation will likely continue to trend above target until there’s an unanticipated shock. Modest action in the near term would reduce the likelihood of needing to take sharper action later." This reinforced expectations for tighter monetary policy, with markets currently discounting a 67% chance of a +25 basis point rate hike at the next FOMC meeting scheduled for September 15-16.
Globally, economic news presented a mixed picture. Weaker-than-expected Chinese economic data cast a shadow on global growth prospects, as the China July manufacturing PMI fell -1.1 to 49.2, marking a 5-month low and missing expectations of 50.1. The July non-manufacturing PMI also declined -1.2 to 49.0, reaching its weakest level in 3.5 years. Despite these concerns, overseas stock markets generally settled higher, with the Euro Stoxx 50 climbing +0.21% to a 3.5-week high, China’s Shanghai Composite closing up +0.72%, and Japan’s Nikkei-225 Stock Average surging sharply by +4.03%.
The ongoing Q2 earnings season remains a significant bullish factor for stocks. Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by +23%, closely following Q1’s robust +30% growth. AI spending is expected to be a primary driver, with AI infrastructure stocks projected to contribute nearly 60% of the S&P 500’s earnings-per-share growth in Q2. So far, earnings results have been largely positive, with 86% of the 291 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data.
Sectoral performance on Friday was varied. Energy producers and service providers saw gains as WTI crude oil prices rose more than +1%, fueled by persistent tensions in the Middle East. Companies like APA Corp (APA), Baker Hughes (BKR), Chevron (CVX), and Devon Energy (DVN) closed up more than +2%, while others such as Diamondback Energy (FANG), Halliburton (HAL), Occidental Petroleum (OXY), SLB Ltd (SLB), and ConocoPhillips (COP) gained over +1%. Conversely, cryptocurrency-exposed stocks faced pressure as Bitcoin (^BTCUSD) fell more than -2% to a 2.5-week low. Coinbase Global (COIN) dropped over -10% after reporting Q2 total revenue of $1.22 billion, below the $1.29 billion consensus. Riot Platforms (RIOT) fell over -8%, and Strategy (MSTR) and MARA Holdings (MARA) closed down more than -4%.
Individual stock movements also highlighted the impact of earnings reports and analyst coverage. Dexcom (DXCM) rose over +10% on strong Q2 revenue and an increased full-year forecast. Monolithic Power Systems (MPWR) gained over +8% after exceeding Q2 revenue expectations and providing a strong Q3 forecast. Eaton Corp Plc (ETN) climbed over +7% on robust Q2 organic sales growth. On the downside, Roblox (RBLX) plummeted more than -26% after reporting Q2 daily active users well below consensus, and Reddit (RDDT) fell over -20% due to a miss on US daily active users. GoDaddy (GDDY) led S&P 500 losers, dropping over -16% on lower-than-expected Q2 total bookings.
Despite the mixed economic signals and the Federal Reserve’s hawkish posture, the market demonstrated resilience, largely driven by strong corporate earnings, particularly from the technology sector’s megacaps led by Amazon. The interplay of robust domestic economic data, global growth concerns, and ongoing geopolitical tensions continues to shape investor sentiment, with a clear focus on corporate performance and central bank policy in the near term.
