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US equities bounced Friday as positive big-tech earnings reports outweighed a disappointing inflation print that showed higher prices are proving more persistent than the Federal Reserve had hoped. Cryptocurrencies were little changed.
The Fed’s preferred inflation measure showed prices increased 2.7% year-over-year in March. Analysts had called for a 2.6% increase. Excluding food and energy, the personal consumption expenditures price index showed a 2.8% annual increase last month, the Commerce Department reported Friday.
The S&P 500 and Nasdaq Composite indexes were trending 1% and 2% higher, respectively, midway through Friday’s session. Analysts say big tech stocks were the market’s saving grace as solid earnings reports from Alphabet and Microsoft had shares up 10% and 3%, respectively.
Read more: Federal Reserve holds interest rates, expects three cuts by end of year
“The share price reaction, although relatively muted, isn’t to be sniffed at,” analysts at Hargreaves Lansdown wrote in a note Friday on Microsoft stock.
“The recent GDP reading from the US was bleaker than expected, and didn’t lend itself well to growth-stock sympathism,” Hargreaves Lansdown analysts added. “To that end, the market’s reaction to these results mean more than in usual times.”
Tech and growth stocks have underperformed recently and yields have increased, Tom Essaye, founder of Sevens Report Research said, so a correction was due.
Cryptocurrencies, on the other hand, moved sideways Friday after a fairly tumultuous week. Bitcoin (BTC) was trending 0.4% higher to sit around $63,600 at time of publication while ether (ETH) dipped 0.3% lower to $3,100, per Coinbase.
Bitcoin, which hit as high as $67,200 earlier in the week, is now down about 1.5% in the first week since the halving. Ether on the other hand has managed to stay in the green, gaining just under 1% in the past seven days.
Traders are looking ahead to next week’s rate decision from the Fed, which will be announced on Wednesday. With the latest inflation numbers, Fed fund futures are showing a 3% chance of a rate cut, down from the 6% odds recorded on Thursday, according to data from CME Group.
“While the March PCE report was only slightly higher than expectations on a year-over-year basis, inflation is proving to be stickier than expected and the idea of ‘reflation’ is taking hold,” Bret Kenwell, US investment analyst at eToro, said. “That doesn’t mean inflation will surge, but it’s one more argument to hold off on rate cuts.”