Stock Recover After Amazon Earnings, Jobs Report
5:01 pm Friday, February 04th, 2022
The major indices are trading mixed, as investors balance hawkish Fed expectations following the January employment report with huge earnings relief in Amazon.com (AMZN) and Snap (SNAP).
The negative undertone is being linked indirectly to the surprising employment report, which featured strong jobs growth and higher-than-expected wage gains.
Briefly, nonfarm and private sector payrolls both increased by more than 400,000 in January, blowing past expectations on top of huge upwards revisions for December. In addition, the labor force participation rate increased to 62.2% from 61.9% in December, and average hourly earnings rose 0.7% (Briefing.com consensus 0.5%).
Accordingly, Treasury yields are rising on expectations for the Fed to be more aggressive in tightening policy due to a perception that it’s behind the curve in fighting inflation. The 2-yr yield is up 11 basis points to 1.30%, and the 10-yr yield is up nine basis points to 1.92%. Crude futures are flirting with $93 per barrel.
A 25-basis-point hike in March is still the base case for the market, but the probability for a 50-bps hike has increased to 34.7% from 14.3% yesterday, according to the CME FedWatch Tool.
The financials sector (+1.3%) is keying off the higher rates while the energy sector (+1.9%) is keying off the high oil prices. The consumer discretionary sector (+3.3%), meanwhile, is the top-performer due to Amazon’s better-than-feared earnings report.
Pinterest (PINS) also provided an earnings relief, but its reaction has been more subdued relative to Amazon’s 13% gain and Snap’s 50% gain. Ford Motor (F), Clorox (CLX), and Air Products (ADP), on the other hand, are some of the earnings losers.
January nonfarm payrolls increased by 467,000 (consensus 180,000). December nonfarm payrolls revised to 510,000 from 199,000.
January private sector payrolls increased by 444,000 (consensus 160,000). December private sector payrolls revised to 503,000 from 211,000.
