By Corrie Driebusch
Technology stocks rose Friday following strong corporate
results, pushing both the Nasdaq Composite and the S&P 500 into
record territory.
Trading during the week was slower than usual, even as stocks
climbed to new highs in an ascent driven by better-than-expected
earnings.
On Thursday, the Nasdaq Composite advanced to a record close for
the first time in 15 years. On Friday, the index extended those
gains, rising 36.02 points, or 0.7%, to 5092.08, following strong
quarterly results from companies such as Microsoft Corp. and
Amazon.com Inc.
"Tech is the whole story today on the upside," said Art Hogan,
chief market strategist at Wunderlich Securities. "That's where the
excitement is."
"The Nasdaq has been outperforming this earnings season as it's
clearly less impacted by energy prices and the strong dollar," Mr.
Hogan said.
The Nasdaq's gains this year have outpaced advances in the Dow
industrials and S&P 500. The Nasdaq has rallied 7.5% in 2015,
while the Dow has added 1.4% and the S&P has advanced 2.9%.
Over the last 12 months, the Nasdaq has surged 23%, more than twice
the Dow's 9.6% gain.
The S&P 500 on Friday climbed 4.76 points, or 0.2%, to
2117.69, hitting a fresh intraday high and closing at a record. The
Dow Jones Industrial Average added 21.45 points, or 0.1%, to
18080.14.
The CBOE Volatility Index closed at its lowest level of the
year, down 1.5% to 12.29. The average for the VIX, which tends to
fall as stocks rise, in 2015 is 16.01.
The gains on Friday were driven primarily by a number of solid
corporate earnings reports.
Microsoft Corp. said late Thursday sales in the third quarter
ended March 31 rose nearly 6.5% from a year earlier, boosted in
part by the inclusion of sales from Nokia Corp.'s mobile-phone
business. Sales beat Wall Street's expectations even as a strong
U.S. dollar weighed. Shares rose 10%, adding about 30 points to the
Dow.
Google said its revenue took a hit from the rising dollar in the
first quarter, as the company generated more than 55% of its
revenue outside the U.S. But shares rose 3.3% as better expense
control boosted profit margins.
Amazon.com swung to a first-quarter loss despite rapidly rising
sales, as it continued to spend heavily to fund a variety of
projects. Shares of the e-commerce giant rallied 14% as it reported
a surprise profit from its cloud-computing business.
The share gains by the trio of established technology companies
did not surprise Michael Tiedemann of Tiedemann Wealth Management,
which manages $9.5 billion.
"Big, older tech looks attractive," said Mr. Tiedemann. He said
while he likes "the Apples, the Googles, the Microsofts" of the
tech sector, he is more wary of social media and "disruptive
technology" companies whose valuations may be higher.
Overall, first-quarter earnings are coming in above lowered
expectations. Of the 201 companies in the S&P 500 that have
reported earnings, nearly three-quarters have reported earnings
above the mean estimate, according to FactSet. Still, earnings
growth is widely expected to decline, with analysts currently
predicting a decrease of 2.8%, FactSet said.
"There was clearly a lot of downward managing of expectations
going into the season, but the beats are broader than usual," said
Stephen Freedman, head of cross-asset strategy at UBS Wealth
Management Americas. He said he likes consumer discretionary as
well as technology companies, and expects earnings to drive more
stock-market gains through the rest of 2015.
"We don't think it's going to be spectacular from here, but
we're looking for high single-digit returns for the year," he
said.
In other corporate news, Starbucks Corp. said its profit and
sales rose in its latest quarter, with results roughly in line with
analyst expectations. Shares rose 4.9%.
Comcast Corp. on Friday ended its plans to acquire Time Warner
Cable Inc. , as increasing pressure from regulators prompted the
end of the $45.2 billion deal. Shares of Comcast rose 0.7% and
shares of Time Warner Cable gained 4.4%.
In commodity markets, crude-oil futures fell 1% to $57.15 a
barrel. Gold futures slipped 1.6% to $1175.20 an ounce. The yield
on the 10-year Treasury note fell to 1.917% from 1.945% on
Thursday. Yields rise as prices fall.
European stocks rose, with Germany's DAX adding 0.7% and
France's CAC 40 gaining 0.4%.
Saumya Vaishampayan contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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