Wall Street ended solidly higher on Friday, after earnings from tech behemoths Microsoft (MSFT) and Alphabet (GOOG) (GOOGL) reignited the artificial intelligence (AI) craze. Moreover, traders bracing for another hotter-than-expected reading on inflation were calmed after the Federal Reserve's preferred price gauge largely matched estimates.
The benchmark S&P 500 (SP500) climbed 1.02% to close at 5,099.81 points. Meanwhile, the tech-heavy Nasdaq Composite (COMP:IND) surged 2.03% to settle at 15,927.90 points and notched its best day since February 22. The blue-chip Dow (DJI) lagged the other two indexes in terms of gains, but still rose 0.40% to conclude at 38,239.66 points.
Of the 11 S&P sectors, six ended in the green. Communication Services saw an outsized jump of nearly 5%, boosted by Microsoft (MSFT) and Alphabet (GOOG) (GOOGL).
The two tech giants on Thursday delivered quarterly results that cemented their dominance in the AI race. Investors took heart from the reports, especially after soft guidance from Meta Platforms (META) and its heavy spending on AI had sent alarm bells ringing. The Google-parent's stock in particular clocked a double-digit rise on Friday after top boss Sundar Pichai touted that the company was "well under way with" its Gemini era, referring to its AI model.
The other major event today was the release of personal income and outlays data for March. The report from the Bureau of Economic Analysis showed that the core personal consumption expenditures (PCE) price index – the Fed's favored inflation gauge – rose 0.3% M/M in March, matching the +0.3% consensus and flat from February's pace. On a Y/Y basis, the core PCE price index rose 2.8%, topping the +2.7% consensus but unchanged from February.
With hotter-than-expected consumer price index reports recently along with Thursday's data that showed a higher-than-anticipated jump in the Q1 core PCE price index, market participants were bracing for the worst coming into today's announcement. The largely in-line result alleviated some concerns that interest rate cuts were almost entirely off the table for 2024.
