What happened in the markets: 29 Jan - 2 Feb 2024
Stocks continued their record-breaking streak on Friday, as both the S&P 500 and Dow Jones average achieved new record closing highs. This was driven by a robust jobs report, which boosted confidence in corporate profits.
The tech sector saw a significant rally, fueled by Meta's strong earnings report and the announcement of its inaugural quarterly dividend, leading to a more than 20% increase in its share price. Amazon also experienced an 8% surge following its own impressive earnings results.
The tech rally diverted investor attention from a surprisingly strong non-farm payrolls report, causing the benchmark 10-year Treasury yield to surge by 17 basis points to 4.02%. This development likely eliminated any remaining possibility of the Federal Reserve initiating interest rate cuts in March.
For the week, the S&P and Dow each gained 1.4%, while the Nasdaq Composite climbed 1.1%, marking the fourth consecutive week of gains.
Last week at a glance
Saudi Aramco Reverses Decision On Boosting Output
As we navigate the ever-evolving landscape of the energy market, it's crucial to stay informed about the strategic decisions of industry leaders. Saudi Aramco, the state-owned oil titan, has recently been directed by Saudi Arabia to maintain its oil production capacity. This marks a significant shift from the company's initial plan to increase its capacity from 12 million barrels per day to 13 million by 2027. This decision comes at a time when the global demand for oil is under scrutiny, with a gradual transition towards natural gas and renewable energy sources. The International Energy Agency has even suggested that fossil fuel demand may peak before 2030, a notion that has been met with skepticism by some industry experts, including Aramco's CEO, Amin Nasser.
Tech Earnings - Meta Up More Than 20%
In the realm of technology, Microsoft's recent Q2 earnings report has provided a beacon of positivity. The company's shares remained stable as it surpassed expectations, thanks in large part to the robust performance of its Azure cloud services and the introduction of new AI features. This contrasts with Alphabet's experience, which saw a dip in share value due to slower advertising sales growth. Meanwhile, Meta Platforms and Amazon both enjoyed a surge in their share prices following positive financial revelations, with Meta announcing its first-ever dividend and Amazon reporting a strong quarter. Apple, however, faced challenges related to its market presence in China, which overshadowed the end of its streak of quarterly sales declines.
Rate Cuts By March Most Likely Not Happening
In the financial policy arena, Federal Reserve Chair Jerome Powell has indicated that while an interest rate cut is unlikely in March, it remains a possibility later in the year. The Fed's commitment to maintaining rates between 5.25% and 5.50% is part of a cautious approach to ensure a sustainable path to 2% inflation. Powell's comments have had a dampening effect on stock markets and yields, as investors digest the implications of the Fed's timing on rate adjustments.
Legal Battles: Disney vs DeSantis + Judge Voids Elon’s Pay Package
Lastly, in the legal sphere, Disney's lawsuit against Florida Governor Ron DeSantis was dismissed, with the court ruling that the company lacked the legal standing to sue on the basis of free speech violations. This dispute originated from the Parental Rights in Education Act and has since expanded into broader conflicts. In other legal news, a Delaware judge voided Elon Musk's substantial pay package at Tesla, while Musk has hinted at incorporating the company in Texas and announced the first human brain implant from his Neuralink venture.
Surprisingly Strong Jobs Report Buys Fed Time For Rate Cuts
The Fed rate announcement didn't bring any surprises, but the latest jobs report certainly did. In January, the economy added an impressive 353,000 payrolls, which was double the consensus estimate. This marked the strongest monthly gain in over a year and the second consecutive month with over 330,000 new jobs, a level last seen in the summer of 2022. The unemployment rate remained steady at 3.7%, just slightly above the 50-year low of 3.4%. Despite the significant increase in hiring, the unemployment rate stayed the same due to a rise in the labor force.
Top movers & shakers🎢
Meta (META) - rose more than 20% after a strong earnings report and announcement of its first-ever quarterly dividend.
Amazon (AMZN) - saw a nearly 8% surge, reaching its highest close since December 2021, following the company's surpassing of earnings forecasts and its projection of an 8% to 13% increase in first-quarter revenue.
Apple (AAPL) - experienced a 0.5% decline as worries about the iPhone maker's decreasing sales in China overshadowed its better-than-expected earnings in the last quarter.
Chevron (CVX) - rose by 2.9%, leading Dow gainers, after the energy producer exceeded earnings expectations and raised its dividend.
Clorox (CLX) - soared by more than 5% following quarterly results from the consumer products company that surpassed expectations.
Deckers Outdoor (DECK) - rallied by 14% after the footwear company reported quarterly results that exceeded expectations.
The week ahead: 5 Feb - 9 Feb 2024
The upcoming week will be filled with earnings reports as investors navigate through the peak of the reporting season. Notable companies set to report include McDonald's, Caterpillar, Alibaba, Philip Morris, and PepsiCo. Additionally, Federal Reserve members will resume speaking engagements after last week's FOMC meeting.
Key economic events to monitor include the release of the Fed's Senior Loan Officer Opinion Survey on bank lending practices, updates on consumer credit, the trade gap, and PMI.
The release of CPI seasonal factors on February 9 may result in slight revisions to seasonally adjusted inflation data.
Historically, February has been relatively flat for the S&P 500 and Nasdaq 100 indices, while the Dow Jones Industrial Average has shown negative returns on average and the Russell 2000 Index has posted gains.
Earnings
Monday, February 5 - McDonald's (MCD), Caterpillar (CAT), Vertex Pharmaceuticals (VRTX), Tyson Foods (TSN), and Estee Lauder (EL).
Tuesday, February 6 - Eli Lilly (LLY), Toyota Motor (TM), Centene (CNC), Amgen (AMGN) and Ford Motor (F)
Wednesday, February 7 - Alibaba (BABA), CVS Health (CVS), McKesson (MCK), Disney (DIS), Uber Technologies (UBER), and PayPal (PYPL).
Thursday, February 8 - ConocoPhillips (COP), Philip Morris (PM), Duke Energy (DUK), Expedia (EXPE), Take-Two Interactive (TTWO) and Pinterest (PINS).
Friday, February 9 - PepsiCo (PEP) and AMC Networks (AMC).
Events
The World Defense Show - is set to take place in Saudi Arabia, with several major companies confirmed to participate. These include General Dynamics (GD), Lockheed Martin (LMT), Boeing (BA), Northrop Grumman (NOC), and L3Harris (LHX). Boeing (BA) will showcase a virtual-reality display of the F-15EX cockpit as part of its presence at the event.
Sources:
https://seekingalpha.com/article/4667275-wall-street-breakfast-what-moved-markets
https://seekingalpha.com/article/4667363-wall-street-breakfast-week-ahead
https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/stock-market-weekly-update
https://www.schwab.com/learn/story/schwab-market-update
*Disclaimer: This information is provided for general information purposes only. Consider your investment objectives, financial resources and other relevant circumstances carefully before investing. This is not an invitation or an offer to invest, nor is it financial advice or a recommendation to buy or sell any investment.
