Wall Street close to record highs after upbeat earnings, GDP data

Robust earnings from Google-owner Alphabet and Twitter took the S&P 500 and Nasdaq indexes close to record levels on Friday, with data showing the domestic economy slowed lesser than expected in the second quarter providing support.

The Commerce Department said GDP increased at a 2.1% annualized rate in the second quarter, higher than a 1.8% rate that economists polled by Reuters forecast.

“It’s a little higher than expected, but on the heels of news from a dovish ECB yesterday and mixed earnings reports, this is another sign that growth is certainly cooler in Q2,” said Mike Loewengart, vice-president of investment strategy at ETrade Financial in New York.

“It’s important for marketwatchers to remember that it is still meaningful growth and despite it being hotter than most predicted it probably won’t derail the Fed.” The data comes on the heels of European Central Bank President Mario Draghi speech on Monday, which was less dovish than investors had anticipated and led the S&P 500 to post its first loss in the week.

Hopes that the Federal Reserve will cut rates by at least 25 basis points at its policy meeting next week have powered a solid run in stocks this month, helping Wall Street scale record levels.

Alphabet Inc jumped 9.8% after its quarterly results beat estimates, easing investor concerns about growth challenges faced by its Google advertising business.

Twitter Inc rose 9.9% after it posted better-than-expected second-quarter revenue and an uptick in daily users who see advertisements on the site.

Their upbeat earnings pushed the communication services sector up 2.65%, the most among S&P sectors.

The Dow Jones Industrial Average was up 13.20 points, or 0.05%, at 27,154.18, the S&P 500 was up 14.39 points, or 0.48%, at 3,018.06. The Nasdaq Composite was up 68.95 points, or 0.84%, at 8,307.49.

Two weeks into the second-quarter earnings season, about 75% of the 218 S&P 500 companies that have reported so far have topped profit estimates, according to Refinitiv data.

Among other stocks, McDonald’s Corp jumped as much as 2.1% to a record high after beating quarterly sales expectations at established US restaurants.

Intel Corp pared premarket gains to trade 0.6% lower. The chipmaker gave an upbeat current-quarter forecast and raised its full-year revenue guidance, allaying concerns about a global chip slowdown and curbs on US sales to China’s Huawei Technologies Co.

Amazon.com Inc fell 2%,after the online retailer reported its first profit miss in two years and said income would slump in the current quarter.

Advancing issues outnumbered decliners by a 1.84-to-1 ratio on the NYSE and by a 2.32-to-1 ratio on the Nasdaq.

The S&P index recorded 31 new 52-week highs and two new lows, while the Nasdaq recorded 82 new highs and 52 new lows.

Meanwhile, European Stocks staged a tentative recovery on Friday as a rally in media Stocks and solid earnings at several US companies helped investors overcome the disappointment of the European Central Bank’s failure to deliver immediate policy easing.

A day after its worst session in three weeks, the pan-European Stock benchmark index added 0.4%.

London’s FTSE 100 also revived, helped by Vodafone’s plans to create a separate European tower company and education firm Pearson’s gains from an upbeat trading update.

Decent US earnings overnight from Google’s owner Alphabet , Intel and Starbucks helped offset worries from weaker Amazon numbers.

ECB President Mario Draghi on Thursday all but pledged to ease policy further and even hinted at a reinterpretation of the ECB’s inflation target. But many investors had hoped for an immediate reduction of interest rates.

Helping to offset the disappointment, shares of Vivendi rose 5.7% after stellar first-half results at its Universal Music Group raised the stakes for the sale of the French media giant’s most-prized asset.

That helped Europe’s media sector advance 1.6%. Vodafone jumped 9.8% on plans to move its mobile mast operations in 10 European markets into a new company that it potentially could list.

In Asia, uncertainties over whether Washington and Beijing will be able to settle gaping differences over trade, technology and even geopolitical ambitions, kept many investors on guard. Negotiators from the two countries will meet in Shanghai next week. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6%. A rally in global bonds ran out of steam after Draghi cautioned about pulling the trigger too quickly on policy easing.

Still, the euro’s overnight index swaps are pricing in a rate cut of more than 10 basis points in September, to minus 0.50 percent.

“An interest rate cut of 10 basis points in September looks like a done deal now,” said Hideki Kishida, fixed income strategist at Nomura Securities.

Agencies