Stock Futures Rise as Amazon, Apple Record Strong Quarterly Results

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Traders are hoping the Fed soon halts its campaign of raising interest rates to rein in inflation

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US stock futures were up Thursday evening as Apple and Amazon reported their latest quarterly earnings.

Amazon (ticker: AMZN) rose 13.9% to lead all companies in after-hours trading, while Apple (AAPL) was up 3.4%. Intel ( INTC ), which also released results after the bell, saw its shares fall 8.2% on earnings that severely underwhelmed analysts’ forecasts.

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After spiking on Wednesday afternoon, when the Federal Reserve

announced a 0.75-point increase to raise the federal-funds rate to a target range of 2.25% to 2.5%, stocks rose again on Thursday. The S&P 500, Dow Jones Industrial Average, and tech-heavy Nasdaq Composite finished up 1.2%, 1%, and 1.1%, respectively. Markets briefly dipped in the morning after an advance reading of US gross domestic product growth came in negative for the second quarter, falling 0.9% on an annual basis, before stocks fought out of the hole and climbed gently throughout the afternoon.

Powered by after-hours gains from tech giants like Apple and Amazon, which combine together for a market capitalization of about $3.79 trillion, the Nasdaq was leading its peers Thursday evening.

At 6:30 pm Eastern time, futures for the S&P 500, Dow Jones Industrial Average, and Nasdaq were up 0.6%, 0.1%, and 1.2%, respectively.

Corporate results from companies like Amazon, Apple, and Intel are offering investors clues about the state of the economy. Amazon’s $121 billion in sales outpaced expectations, and it posted an operating income of $3.3 billion for the quarter, despite losing $2 billion on a generally accepted accounting principles basis and incurring a $3.9 billion nonoperating expense tied to Amazon’s stake in Rivian ( RIVN ). Compared to analysts’ estimate of $126 billion in third-quarter sales, according to FactSet, the company’s third-quarter revenue guidance of $125 billion to $130 billion includes room for potential upside.

Apple reported profits of $1.20 per share, beating expectations for $1.16 per share.

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Intel sales fell 22% to $15.3 billion in the second quarter, and the company’s adjusted earnings per share of 29 cents were less than half of analysts’ 69-cent estimate, as chief executive Patrick Gelsinger cited a “sudden and rapid decline in economic activity ” as the “largest driver” of the poor results.

Roku ( ROKU ) stock also sank 25% Thursday evening, with the connected-television company blaming a “significant slowdown” in TV advertising for its projections of $700 million in third-quarter revenue. Analysts had been expecting $898 million.

Even as earnings season progresses and investors look for insights in other sources, like Fed. commentary and Thursday’s GDP estimate, the economic picture isnt clear. Thursday’s GDP reading, which showed a second straight quarterly contraction, would conventionally suggest that the economy had entered a recession; however, other parts of the economy, particularly the labor market, remain very sturdy. The National Bureau of Economic Research, which officially determines the timing and duration of recessions, hasn’t called a recession, but would likely only do so long after one has begun.

Pantheon Macroeconomics Chief Economist Ian Shepherdson put it simply in a Thursday memo: “The economy is not in recession,” he wrote. “Payroll growth averaged 456K across the first half, a pace usually not seen even at the peak of booms.”

Friday’s Personal Income & Outlays report will include June readings for the personal-consumption expenditures price index, the Fed.’s preferred gauge of inflation. The core version of this index, which strips out the more volatile food and energy categories, is expected to rise 4.7% from a year ago, which would be equivalent to May’s 4.7% annual growth rate, according to 12 economists surveyed by The Wall Street Journal.

An update to the index could test markets’ recent optimization with Fed. Chair Jerome Powell. Morgan Stanley economists, for example, wrote that they continue to envision a “step path for rate increases this year” after Wednesday’s 0.75-point increase. They also believe the “pace of tightening going forward will be highly data-dependent,” suggesting the new inflation data Friday could assume extra importance. The CME FedWatch Tool currently estimates a 74% chance of an increase of 50 basis points, or half a percent, when the Federal Open Market Committee makes its next move in late September. The tracker assigns a probability of 26% to a 75-basis-point raise.

The University of Michigan’s final consumer sentiment report for July also comes out at 10 am Friday. Economists polled by the Journal anticipate a reading of 51.1, which would be in line with the month’s preliminary reading but still nearly 40% off the index’s value from a year ago.

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