Stocks rose on Friday morning as investors waited for developments out of Washington, D.C. on debt ceiling deliberations and digested the latest corporate earnings as a fresh wave of artificial intelligence optimism boosted tech stocks.
Near 10:00 a.m. ET, the S&P 500 (^GSPC) is up more than 0.6%, the Dow Jones Industrial Average (^DJI) is up more than 200 points, or 0.6%, while the Nasdaq Composite is heavy. Technology (^IXIC) gained nearly 1%.
The Nasdaq was the only one among the major indexes heading for weekly gains through Friday morning.
Friday morning, Reuters reported that President Joe Biden and House Speaker Kevin McCarthy are “close to a deal” to extend the government’s debt ceiling by two years.
“Negotiators appear to be closing in on an agreement,” Goldman Sachs’ economic research team led by Jan Hatzios wrote in a note to clients Thursday night.
“While it is difficult to predict when an announcement will be made, we believe the odds are higher for a deal to be announced late Friday (May 26) or Saturday (May 27). If that is the case, this could potentially allow for a vote in the House late in the Tuesday (May 30) or Wednesday (May 31). The Senate also needs to pass the deal, although it is unlikely that there will be procedural hurdles preventing timely legislation.”
The Nasdaq rose to close 1.7% higher Thursday as a quarter of Nvidia (NVDA)’s blowout sent the chip giant’s stock up more than 24%.
Earnings continued to move stocks on Friday morning as well.
Marvell Technology (MRVL) stock rose more than 25% on Friday as the chipmaker joined Nvidia in sharing positive artificial intelligence news. Marvell believes its revenue attributed to artificial intelligence could double in the next year.
“Artificial intelligence has emerged as a key driver of growth for Marvell,” Marvell CEO Matt Murphy said in the company’s earnings release. “While we are still in the early stages of our AI trajectory, we expect AI revenues in fiscal 2024 to at least double from the previous year and continue to grow rapidly in the years to come.”
Chip names including Broadcom (AVGO), Ambarella (AMBA), Skyworks (SWKS) and Micron (MU) rose more than 3% on Friday. The PHLX Semiconductor Index (^SOX) also gained more than 3.5% on Friday.
Elsewhere on the earnings front, Gap (GPS) stock rose more than 10% after the apparel retailer posted a surprise profit late Thursday. Meanwhile, shares of Ulta Beauty (ULTA) fell nearly 10% after the company warned of slowing growth trends, even though the beauty store chain beat revenue and earnings-per-share expectations on Wall Street for the first quarter.
“Category growth is healthy but moderate with two years of unprecedented growth. As category growth returns to normal, promotional activity is picking up,” Ulta CEO Dave Kimble said on the company’s earnings call.
On the economic data side, the personal consumption expenditures price index – the Fed’s preferred inflation measure – came in hotter than expected and upended market expectations for the central bank’s next policy announcement on June 14.
Core personal consumption expenditures rose to 4.7% from a year ago in April, more than the 4.6% increase economists had expected and accelerating from the 4.6% annual jump in March. Data released by CME Group as of Friday morning showed investors pegged a 58% chance of the Federal Reserve raising interest rates by another 0.25% next month after this release.
“We will stick to the Federal Reserve’s expectation to keep interest rates unchanged through the remainder of this year,” Ryan Sweet, chief US economist at Oxford Economics, wrote on Friday. “However, chances are increasing that we will change our federal funds rate projections in 2024, reducing the number of rate cuts.”
Personal income and spending data also showed that consumers held steady in April with spending rising 0.8% last month, more than the 0.3% increase economists had expected. Durable Goods Orders also provided a surprise as the preliminary reading for April showed an increase of 1.1% last month. Economists had expected this data to show a decline of 1%.
However, May consumer confidence data from the University of Michigan showed that a debt ceiling standoff has dampened the economic outlook for many Americans, with sentiment down 4 points ahead of April.
“Consumer sentiment fell 7% amid concerns about the path of the economy, erasing nearly half of the gains made after an all-time low last June,” said Joanne Hsu, Director of Consumer Surveys.
“This downturn reflects the 2011 debt-ceiling crisis, during which sentiment also slumped. This month, sentiment for Western and middle-income consumers has fallen sharply. Economic forecasts for the year ahead are down 17% from last month.”
Josh is Yahoo Finance Correspondent.
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