![Mason Ramsey – Twang [Official Music Video]](https://i.ytimg.com/vi/xwe8F_AhLY0/maxresdefault.jpg "Mason Ramsey – Twang [Official Music Video]")
US stocks rose on Friday, at the end of a brutal week for some of the world’s biggest tech companies capped by lower than expected revenue forecasts from Amazon.
The benchmark S&P 500 index gained 0.5 per cent after the New York opening bell, while the tech-heavy Nasdaq Composite added 0.8 per cent. Europe’s Stoxx 600 slipped 0.4 per cent, trimming earlier losses, while London’s FTSE 100 fell 0.3 per cent.
The gains on Wall Street came even as Amazon’s shares slid more than 9 per cent after the company 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 and $148bn in the fourth quarter — as much as $15bn less than the figure forecast by analysts.
The announcement from the ecommerce group extended a surprisingly weak earnings season from US tech behemoths, defying hopes that these companies would be more resilient to a challenging economic backdrop. Shares in Microsoft, Alphabet and Facebook-owner Meta have fallen in recent days as rising costs and slowing economic growth begin to take their toll on earnings.
However, Apple bucked the trend after the bell on Thursday — reporting revenue and earnings above analysts’ expectations. Its shares were up 4.5 per cent in early dealings on Friday, despite the group saying it faced a difficult December quarter as it confronts “significant” foreign exchange headwinds and supply challenges for its latest iPhone model.
Overall, the S&P was on track to close out a second week of gains.
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 — raising interest rates by an extra-large 0.75 percentage points at each of its past three meetings to a target range of 3 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.
The Fed’s preferred inflation metric, the core personal consumption expenditures index, meanwhile 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 0.03 percentage points to 3.97 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 to their highest level since 2009 in an attempt to damp rapid price growth.
In Asia, 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 was down 3.7 per cent, while China’s CSI 300 fell 2.5 per cent.
