By Joyce Yu
Philadelphia, PA–Wall Street opened higher on Friday as robust earnings from technology giants and positive quarterly GDP growth lifted investor sentiment.
Amazon soared 8.18% after its earnings report showed increasing sales surged and better-than-expected profit. Google-parent Alphabet advanced 3.9 % after reporting strong advertising sales which boosted its revenue. Microsoft gained 4.86% as gains from its cloud computing services expanded. Apple was up 1.4% as pre-booking for its highly-anticipated iPhone X starts in the day.
“Earnings is driving the positive sentiment at the open,” Scott Brown, chief economist at Raymond James in St. Petersburg, Florida, told the Reuters. “Certainly a lot of enthusiasm for tech stocks that have reported.”
With the third-quarter earnings season almost half way through, 74% of the S&P companies topped expectations as of Thursday, above the 72% beat rate for the past four quarters. Tech stocks have rallied this year, with the S&P technology index gaining about 30% this year, double the gains in the broader S&P index.
The markets are further bolstered by positive data from the U.S. economy which unexpectedly maintained a brisk pace of growth in the quarter as an increase in inventory investment and a smaller trade deficit offset a hurricane-led drop in consumer spending and construction activities.
GDP increased at a 3.0% annual rate in the July-September period, the Commerce Department said on Friday. Economists polled by Reuters had forecast a 2.5% growth.
“We haven’t had a lot of back-to-back 3 percent quarters in this entire recovery and we certainly haven’t had that when we’re back to full employment,” Jim Paulsen, chief investment strategist at Leuthold Group LLC, said on Bloomberg TV. “Take the data coming out of late, it’s almost getting too good.”
Accumulated inventories investment reached $35.8 billion in the third quarter in anticipation of strong demand, contributing 0.73 percentage point to third-quarter GDP growth. The sector added just over a tenth of a percentage point to output in the prior period. Excluding inventory investment, the economy grew at a 2.3 percent rate, slowing from the second quarter’s 2.9 percent pace. A measure of domestic demand also decelerated to a 2.2 percent rate from the April-June period’s 3.3 percent pace.
The economy has grown for eight straight years, one of the longest stretches in history. Unemployment is down to 4.2%, the lowest level since 2001.
Energy companies with earning reports due today include ExxonMobil and Chevron. Energy firms have been under pressure due to low crude prices, and largely absent from this year’s market rally. ExxonMobil shares have fallen by about 8% in 2017, while Chevron has inched up by less than 1%.
