U.S. equities finished higher Friday, pushing stocks towards one of their best monthly gains in two years, as a pair of better-than-expected big tech earnings, as well as fading bets on big Fed rate hikes, added to improving investor sentiment.
Futures pared earlier gains, however, after a faster-than-expected June reading of the Fed's preferred inflation gauge, the core PCE price index, which spiked to an annualized rate of 4.8%.
Investors had been paring bets on another jumbo Fed rate hike in September, but the PCE readings, which included a headline rate of 6.8%, clipped some of that optimism. The CME Group's FedWatch now suggests a near 70% chance of a 50 basis point increase, down from 80% in early trading following yesterday's grim assessment of first quarter GDP growth.
The economy likely contracted by 0.9% over the three months ending in June, the Commerce Department said Thursday, following a 1.6% slump over the first quarter, potentially tipping it into a full-blow recession, and compelling a Fed re-think on the level of aggression with which is should continue to tackle inflation.
Those pressures aren't likely to recede quickly, however, with data from Europe this morning showing July HICP, the region's harmonized inflation measure, rising to a record 8.9% over the month of July. The Fed's preferred gauge, the PCE Price Index, will be published at 8:30 am Eastern time, with economics expecting the biggest monthly increase for the core component reading in six months.
Still, better-than-expected earnings from Apple (AAPL) and Amazon (AMZN) after the close of trading last night look firm enough to give stocks another boost ahead of today's inflation data, as well as another round of June quarter updates prior to the opening bell, highlighted by oil giants Exxon Mobil (XOM) and Chevron (CVX).
Apple shares finished 3.3% higher after the world's most-valuable tech company topped Street earnings forecasts, noting the anticipated supply chain hit was lighter than it had forecast while China sales held up despite the country's spring Covid lockdown.
Amazon, meanwhile, surged 10.4% after its better-than-expected second quarter sales of around $119 billion, and easing cost pressures, softened the impact of the online retail giant's second consecutive quarterly loss.
In overseas markets, European stocks were trading firmly higher in Frankfurt, boosted by data showing that the German economy, the region's biggest, avoided turning negative over the second quarter, while Eurozone GDP -- the measure of growth for countries using the single currency -- came in better than forecast at +0.6%.
The region-wide Stoxx 600 index was marked 1.3% higher in late-day trading, putting the benchmark on pace for a July gain of around 7.4%.
Overnight in Asia, the region-wide MCSI ex-Japan index fell 0.37% as China stocks slumped following a statement from the Communist Party that omitted mention of a specific economic growth target for the 2022 year, promising only to "strive to achieve the best possible results."
In U.S. markets, fading rate hike bets and slowing growth forecasts continue to pressure Treasury bond yields, with 2 year notes rose to 2.882% and 10-year notes trading at 2.656%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.46% lower at 105.86.
On Wall Street, the S&P 500 finished up 1.42%, while the Dow Jones Industrial Average rose 315 points, or 0.97%, to 32,845. The tech-focused Nasdaq gained 1.88%.
Stocks on the move include Chevron, which rose 8.7% after posting much stronger-than-expected second quarter earnings as a surge in global crude prices, powered in part by Russia's war on Ukraine, boosted the group's top and bottom line.
Rival Exxon saw similar gains, with its shares up 4.74% after a quarterly bottom line that neared $18 billion.
On the flip side, Procter & Gamble Co. (PG) shares fell 6.1% after publishing softer-than-expected fourth quarter earnings while hinting to currency and inflationary pressures in the months ahead.
Intel (INTC) shares slumped 8.56% after the chip maker posted much weaker-than-expected second quarter earnings, while cutting its full-year sales forecast, amid a pullback in demand for laptop and desktop computers.
Roku (ROKU) shares collapsed 23.1% after the streaming service hub posted a wider-than-expected second quarter loss and pulled its full-year sales guidance amid the ongoing pullback in global advertising spending.
