What happened
Shares of Alphabet (GOOG -1.74%) (GOOGL -1.51%) were moving higher after the FAANG stocks reacted to a cooler-than-expected Producer Price Index report, showing inflation actually fell on a monthly basis. Alphabet is also expected to ask a judge to toss out an antitrust lawsuit, according to a report in The Wall Street Journal.
As of 11:03 a.m. ET, the stock was up 1.8%, while the Nasdaq had gained 1.4% at the same time.
So what
Tech stocks reacted favorably to the Producer Price Index. Falling inflation should benefit the sector since it will help encourage the Federal Reserve to step back from raising interest rates. That would benefit growth stocks as higher interest rates make long-dated earnings less valuable.
This morning's Producer Price Index report showed that prices at the wholesale level fell 0.5% from February to March and were up just 2.7% from a year ago, its slowest growth in over a year.
Prices for both goods and services fell, down 1% and 0.3%, respectively, on a monthly basis. Those numbers are particularly encouraging because the PPI tends to be a leading indicator for the Consumer Price Index since wholesale prices influence prices at the retail level.
Alphabet is also expected to argue in court today that a 2020 lawsuit brought by the Justice Department should be dismissed. The DOJ is claiming that Google has gained a monopoly in search through "exclusionary distribution agreements," including those that make it the default search engine on web browsers like Safari and Firefox.
Now what
While the lawsuit is expected to go to trial this year, tentatively scheduled for Sept. 12, Google's arguments will offer a preview of how the company plans to fight back against the charges. The company is also facing a DOJ lawsuit over its advertising auctions and other ad practices, another reminder that the company faces significant regulatory threats.
As for the PPI report, Alphabet is a cyclical business driven by advertising, and the sooner advertisers believe that the economy is starting to recover, the sooner they're likely to spend on ads on Google and YouTube, which would lead the company to return to earnings growth.
