Robust earnings from Alphabet and Starbucks pushed the S&P 500 and Nasdaq indexes to record highs on Friday, with support from data showing U.S. economic growth slowed less than expected in the second quarter.
A spate of solid quarterly results from a wide array of U.S. companies, including Google parent Alphabet Inc, Intel Corp, Starbucks Corp and McDonald’s Corp helped allay disappointment over Amazon’s miss.
U.S. economic growth slowed less than analysts expected in the second quarter on a jump in consumer spending, which more than made up for a drop in imports and a slowdown in inventory build-up.
“All and all, it was a pretty decent number given where estimates were a few weeks ago,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
Market participants now look to the coming week, when U.S. and China negotiators are due resume talks in Beijing aimed at resolving the market-rattling trade war and the Federal Reserve is expected to cut interest rates for the first time in a decade at the conclusion of their two-day monetary policy meeting.
“It’s good that (the U.S. and China) are talking,” Hellwig added. “That’s about all the market expects, a continuing dialog.”
Regarding the Fed meeting, Hellwig believes the central bank will deliver the expected 25 basis point interest rate cut.
“I think the net result will be positive and reaffirm that the Fed is our friend,” he said, adding that the European Central Bank on Thursday “set the stage for monetary easing” globally.
The Dow Jones Industrial Average rose 51.2 points, or 0.19 per cent, to 27,192.18, the S&P 500 gained 22.19 points, or 0.74 per cent, to 3,025.86 and the Nasdaq Composite added 91.67 points, or 1.11 per cent, to 8,330.21.
Starbucks rallied 8.9 per cent to a record high after the world’s largest coffee chain posted its biggest same-store sales growth in three years.
Alphabet Inc surged 9.9 per cent after beating Wall Street targets on higher ad sales and growth at its cloud unit, a high-margin business it is leaning more on to drive expansion.
Twitter Inc rose 9.2 per cent after it posted better-than-expected quarterly revenue and an uptick in daily users who see advertisements on the site.
Canada’s main stock index gained on Friday, driven by a rise in consumer staples and industrial stocks.
The Toronto Stock Exchange’s S&P/TSX Composite index was unofficially up 42.84 points, or 0.26 per cent, at 16,531.04.
Eight of the index’s 11 major sectors were higher.
Tech stocks jumped 1.2 per cent as Constellation Software rose 1.8 per cent and Blackberry Ltd. moved 2.1 per cent higher
The consumer staples sector rose 1.4 per cent, led by a 3.3-per-cent gain by George Weston and 1.4-per-cent increases in Loblaw Co. Ltd. and Alimentation Couche-Tard Inc.
CannTrust Holdings jumped 16.7 per cent after it fired Chief Executive Officer Peter Aceto, more than two weeks after Health Canada found the marijuana producer grew cannabis in unlicensed rooms.
A rally in large-cap stocks pushed European shares higher, as positive earnings and a surge in Vodafone Group spurred a recovery from Thursday’s sell-off, which was driven by the European Central Bank leaving interest rates unchanged.
The pan-European STOXX 600 index rose 0.31 per cent and MSCI’s gauge of stocks across the globe gained 0.24 per cent.
Bucking the trend, emerging-market assets slipped as investors shied away from riskier assets after ECB President Mario Draghi gave a rosier-than-expected economic outlook.
Emerging market stocks lost 0.51 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.69 per cent lower, while Japan’s Nikkei lost 0.45 per cent.
The dollar index, which measures the greenback against other world currencies, climbed to a two-month high, setting a course for a second straight weekly advance.
The dollar index rose 0.22 per cent, with the euro down 0.21 per cent to $1.1122.
The Japanese yen weakened 0.08 per cent versus the greenback at 108.73 per dollar, while sterling was last trading at $1.2384, down 0.56 per cent on the day.
U.S. Treasuries yields were steady following the U.S. Commerce Department’s better-than-expected GDP report.
Benchmark 10-year notes last fell 1/32 in price to yield 2.0756 per cent, from 2.074 per cent late on Thursday.
The 30-year bond last rose 3/32 in price to yield 2.5987 per cent, from 2.603 per cent late on Thursday.
Spot gold added 0.4 per cent to $1,419.16 an ounce.
Copper lost 0.82 per cent to $5,958.00 a tonne.
Oil prices inched up on Friday, ending the week higher after stronger-than-expected U.S. economic data brightened the crude demand outlook and concerns over the safety of oil transport around the Strait of Hormuz threatened supply.
Brent crude futures settled at $63.46 a barrel, up 7 cents. They clocked a weekly rise of about 1.7 per cent.
U.S. West Texas Intermediate crude settled at $56.20 a barrel, rising 18 cents. It gained about 1.2 per cent on the week.
U.S. economic growth slowed less than expected in the second quarter with a boom in consumer spending, strengthening the outlook for oil consumption.
“The data was net positive,” said John Kilduff, partner at Again Capital Management. “GDP beat expectations... consumer spending was just off the charts, but business spending was nearly as bad as consumer spending was good.”
Broader economic slowing, particularly in Asia and Europe, could weaken crude demand outside of the United States and kept prices in check.
“There’s a battle in the market right now between those who think we’re going to see slowing economic conditions that will hit demand... and others (focused on) what’s going on in the Persian Gulf as well as lowered output from the producers,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.