Technology bulls in the stock market are about to get paid.
Pushed up by earnings reports, shares of Microsoft Corp., Google parent Alphabet Inc. and Amazon.com Inc. are poised to add $100 billion in market value at the open, based on prices in after-hours trading. Futures on the Nasdaq 100 Index have climbed 2.8 percent since 4 p.m. Thursday in New York, while contracts on the Standard & Poor’s 500 Index are up 1.2 percent.
Internet and software stocks have been the biggest contributors to the recovery from August’s selloff and are poised Friday to fuel a rally that will erase losses for 2015 in the S&P 500 at the open of trading. Since the bottom on Aug. 25 and before Thursday’s reports, Alphabet had risen 11 percent, Microsoft 19 percent and Amazon.com almost 21 percent. Gains in Facebook Inc. are poised to push the stock over $100 for the first time.
“It’s great news to have these gorillas beat estimates, anytime you have Google, Microsoft and Amazon up it will balance out some of the weaker and more lackluster numbers recently,” Vincent Delisle, portfolio strategist at Scotia Capital Inc., said in an interview. “The market wants to feel good and it’s a cherry on top with these trademark companies beating estimates.”
Microsoft jumped 10 percent, Alphabet surged 9.7 percent and Amazon climbed 9.6 percent at 8:25 a.m. in New York after each reported sales and profits that exceeded analyst estimates. Facebook Inc. didn’t have any news and gained 3.3 percent to $102.94 anyway. The Powershares QQQ Trust exchange-traded fund climbed 2.8 percent to $112.74.
Stocks fell so far and so fast in August that at its depth, the S&P 500 was 15 percent away from the average year-end prediction of Wall Street strategists. Now it’s 5 percent — and the gap is set to narrow further, with four stocks that already account for one-10th of the recovery in the last two months surging.
Even amid the most volatile year for U.S. equities since 2011, professional stock forecasters on Wall Street have held steady in their year-end calls. The median estimate in January was for the S&P 500 to reach 2,225 in a year, a target that barely budged until mid-August, when a six-day selloff that erased $2 trillion in market value sent the forecast to 2,150, where it stands today.
RBC Capital Markets’ Jonathan Golub, whose forecast is 2,100, said in an interview Thursday that his target now has some “upside” again. “It’s frankly happening more than I’d expected or hoped for and I may have not been bullish enough about the resiliency of this market,” he said.
After jumping as much as 1.8 percent Thursday, the benchmark gauge for American equities now sits at a level last seen on Aug. 19 and is 7 points below its Dec. 31, 2014 closing price, making its performance year-to-date just about flat. Slicing it differently: U.S shares have climbed back into the trading range that broke in August, heralding the selloff.
“We had plenty of people question how we were going to maintain our target,” said John Stoltzfus, the New York-based chief market strategist at Oppenheimer & Co. “Our confidence related to the target has been somewhat vindicated by the action since the end of September. It’s a matter of looking at the economics, and we have an expansion showing sustainability and transparency at the Fed.”