The S&P 500 and the Nasdaq rose on Friday after Netflix kicked off the earnings season for growth stocks on an upbeat note, while Google parent Alphabet gained on news of job cuts.
Netflix’s quarterly update comes as the technology sector faces gloomy prospects due to rising interest rates and economic worries that have forced companies such as Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O) to lay off thousands of employees.
The gains made communication services stocks (.SPLRCL) the top gainer among major S&P 500 sectors, climbing 2.7%, with information technology (.SPLRCT) in tow, helped by a 1.6% rise in Microsoft Corp (MSFT.O).
“Investors are starting to look at tech as a sector that’s absolutely beaten down but (their) quality and fundamentals remain,” said Sylvia Jablonski, chief investment officer of Defiance ETFs.
Still, concerns about corporate earnings remain as the U.S. economy shows signs of a slowdown and recession worries increase.
Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.9% for the fourth quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.
“While Netflix did really well and that’s very promising, it’s actually going to be one of the toughest earnings season for Big Tech,” Jablonski said.
Wall Street’s main indexes ended the previous session lower after resilient labor market data renewed concerns the Federal Reserve would continue its aggressive rate-hiking cycle despite recent evidence pointing to easing price pressures.
Commentary from Fed officials has pointed to a terminal rate above 5%, while money market participants still bet rates peaking at 4.9% by June and see a 93.7% chance for a 25-basis point rate hike in February.
Philadelphia Fed President Patrick Harker repeated on Friday his view that it’s time to move to a slower pace of rate rises.
At 10:06 a.m. ET the Dow Jones Industrial Average (.DJI) was down 38.06 points, or 0.12%, at 33,006.50, the S&P 500 (.SPX) was up 16.07 points, or 0.41%, at 3,914.92, and the Nasdaq Composite (.IXIC) was up 106.38 points, or 0.98%, at 10,958.65.
Weighing on the S&P 500, Eli Lilly & Co fell 1.7% after the U.S. health regulator rejected the accelerated approval of its Alzheimer’s drug.
Advancing issues outnumbered decliners for a 1.95-to-1 ratio on the NYSE and a 2.30-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and four new lows, while the Nasdaq recorded 35 new highs and 13 new lows.