Big Tech delivered blowout earnings, but stock futures are barely higher

Stock futures were barely higher early Friday even after some of the biggest tech companies and market leaders — Facebook, Amazon, Alphabet and Apple — reported better-than-expected quarterly results. 

Dow Jones Industrial Average futures rose just 70 points, or 0.2%. The move implied an opening gain of about 80 points. S&P 500 futures added just 0.2%. Nasdaq-100 futures, tracking a tech-heavy index, gained 1%.

There were a few possible reasons for the weakness despite the good Big Tech results:

  • Emergency unemployment benefits are set to expire Friday and Congress and the White House still seem far apart on an agreement.
  • Stocks linked to an economic recovery like banks and retailers were lower in premarket trading Friday as investors asses the biggest quarterly gross domestic product contraction on record and persistently weak job growth. Bank of America and Home Depot were lower in premarket trading.
  • Dow-component Chevron fell 2% in premarket trading after the oil giant reported an $8.3 billion loss in the second quarter as the pandemic “significantly reduced demand.”
  • There could be a so-called sell-the-news effect where now that technology companies have delivered strong results to back up their market-leading run.

Apple shares gained 6% in premarket trading.The company reported a blowout quarter, with overall sales expanding by 11%. Apple also announced a 4-for-1 stock split. 

“Apple’s earnings report was breathtaking,” said Andrew Smith, chief investment strategist, Delos Capital Advisors. “Double-digit revenue growth during a quarter which saw most of the U.S. economy shutdown is remarkable. This earnings report shows that Apple is firing on all cylinders. Apple’s stock crossed the symbolic $400 a share threshold in after-hours trading, boosted by a four-for-one stock split, which was icing on the cake for investors.”

Amazon, meanwhile, traded 5.4% higher as the company saw its sales skyrocket during the coronavirus pandemic. Facebook shares rallied more than 6% in premarket trading as the social media giant posted revenue growth of 11% even amid the coronavirus pandemic slowdown. The company also issued stronger-than-expected sales guidance for the current quarter. 

Google-parent Alphabet also posted better-than-expected results. The stock’s performance was muted relative to the other Big Tech names as the company’s overall revenue decline in its history. Revenues for Google Cloud were also just below analyst expectations. 

“The numbers were amazing relative to expectations,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “We’ll see after their conference calls what has been priced in and what hasn’t.”

Alphabet shares bounced between gains and losses and were last lower by 0.7%.

Collectively the four stocks were set to add about $200 billion to their total market cap, bringing it to more than $5 trillion. 

Big Tech has been the stalwart on Wall Street this year. Amazon and Apple are up 65% and 31%, respectively, in 2020. Facebook and Alphabet have risen more than 14% over that time period. The Invesco QQQ Trust, which tracks the tech-heavy Nasdaq-100, was up about 1.8% in premarket trading, set to add to its 22% gain this year. Meanwhile, the S&P 500 is flat.

The Dow and S&P 500 both fell on Thursday. The Dow dropped more than 200 points and the S&P 500 ended the day down 0.4%. U.S. GDP contracted by 32.9% during the second quarter, surpassing a record drop from mid-1921. 

— CNBC’s Patti Domm contributed to this report.

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