Alex Longley and Anna-Louise Jackson
(Bloomberg) -- U.S. stocks rallied, wiping out losses for the year, as Microsoft Corp., Google parent Alphabet Inc. and Amazon.com Inc. added more than $100 billion in combined market value after quarterly profit topped estimates.
All three technology stocks soared at least 7.5 percent as of 9:36 a.m. in New York. Facebook Inc. also rose, breaking the $100 level for the first time. The Nasdaq 100 Index jumped 2.2 percent to 4,603.56. at 9:36 a.m. in New York, while the Nasdaq Composite Index climbed above 5,000 for the first time since Aug. 19. The Standard & Poor’s 500 Index advanced 0.9 percent to 2,070.91.
Equities got a further boost after China’s central bank cut its benchmark lending rate, stepping up efforts to cushion a deepening economic slowdown. The move comes ahead of Bank of Japan and Federal Reserve meetings next week, as central banks worldwide seek to revive slowing global growth and lackluster inflation.
“It’s been kind of a full house this week, every day some good news,” said Christian Gattiker, head of research at Julius Baer Group Ltd. in Zurich. “It’s been quite a mix, from the corporate side and the central banks. It looks like the whole monetary easing is heading into another round.”
Internet and software stocks have been the biggest contributors to the recovery from August’s selloff, fueling a rally that erased losses for 2015. 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.
“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.”
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 less than 5 percent and the gap narrowing, 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.
“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.”
--With assistance from Joseph Ciolli in New York.