Stock in US futures was down early Friday after stunning employment data for January revealed that the labour market remained better than expected, while results from Big Tech firms released last night knocked on investor mood.
The latest report from Amazon?
The US economy stocks
generated 517,000 jobs in January, more than the 190,000 projected by experts, while the unemployment rate fell to 3.4%, the lowest since 1969. Futures on the S&P 500 (GSPC) lost 1.1%, while futures on the Dow Jones Industrial Average (DJI) declined 0.5%. Contracts on the technology-heavy Nasdaq Composite (IXIC) fell 1.7% pre-market as technology companies struggled.
Apple (AAPL), Amazon (AMZN), and Google parent Alphabet (GOOG, GOOGL) – the market’s most heavily weighted corporations — all reported quarterly earnings that disappointed Wall Street. Pre-market, the shares of the mega-cap names were down 2.7%, 5.3%, and 4.8%, respectively.
Apple reported a 5% drop in revenue due to COVID lockdowns in China and worker demonstrations at the country’s Foxconn factory. iPhone sales, a crucial indicator for the corporation, fell 8% year on year to $65.8 billion, falling short of analyst expectations of $68.3 billion.
Meanwhile, Amazon reported better-than-expected fourth-quarter sales growth but missed on profit, owing partly to hefty losses from its interest in electric vehicle company Rivian Automotive. Amazon’s AWS cloud unit increased by more than 20% year on year compared to the same period in 2022 but fell short of forecasts.
Alphabet’s revenue and profits per share estimates were also missed, as advertising decreased year over year. The figures came after the business let off around 12,000 employees in January, a decision that CEO Sundar Pichai blamed on Alphabet’s overhiring during the economic boom.
“We have considerable effort happening to enhance all parts of our cost structure in support of our investments in our greatest growth priorities to provide long-term, profitable growth,” Alphabet CFO Ruth Porat said in a statement.
Outside of technology, investors were eyeing Nordstrom (JWN) after rumours that investor Ryan Cohen had accumulated a substantial investment in the department store. A person familiar with the subject confirmed the move to Yahoo Finance. Shares jumped 28% before the market opened.
Stocks have been on a run to begin 2023, as investors gambled that weaker economic data will push the Federal Reserve to halt its rate hike cycle sooner than expected. That perspective was strengthened by words from Federal Reserve Chair Jerome Powell on Wednesday, who hinted that indications of “disinflation” are emerging in the economy as the U.S. The central bank boosted interest rates by 0.25%, despite his assertion that additional hikes were on the way.
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Nonetheless, many analysts have been suspicious of the market’s rise and Wall Street’s expectations that the Fed will suspend its interest rate hike campaign this year. “Now is not the time for subtlety. Aggressive tightening in 2022 has resulted in signals of deceleration, but at unacceptably high levels “In a note, Lazard’s chief market analyst Ron Temple stated.
“Falling bond rates and increasing share prices have complicated the process by easing the financial conditions that the Fed is attempting to tighten, necessitating robust message from the FOMC this week.” “The Fed won’t be able to relax until labour market conditions soften much from present levels, which is unlikely unless rates remain higher for longer than markets currently expect.”
Morgan Stanley’s chief market analyst Mike Wilson linked the bounce to the January effect, a market notion that securities prices rise faster in January than in any other month after a year-end sell-off for tax considerations.
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