Stocks rose on Friday as strong earnings from major tech companies like Meta and Amazon lifted markets, offsetting concerns over a blowout January jobs report that could push the Federal Reserve to keep interest rates higher for longer.
Meta Soars on Strong Earnings, User Growth
Shares of Meta Platforms surged over 20% in pre-market trading after the Facebook parent company reported fourth-quarter results that beat Wall Street’s expectations.^[1] Meta earned $3.11 per share on revenue of $32.17 billion, topping forecasts. The company also reported modest user growth after losing users last quarter.
While Meta cautioned of “softness” in early 2023 ad spending, analysts viewed the report as a major step in the right direction. “Meta has embarked on an impressive turnaround,” said Edward Jones analyst David Heger.^[2]
Other social media stocks rallied in sympathy, with Twitter up over 8% and Snap gaining over 5% pre-market.^[3]
Amazon Tops Estimates, Announces Job Cuts
Amazon stock popped nearly 8% after the e-commerce giant posted record holiday quarter revenue of $149.2 billion and earnings per share of $0.03, exceeding estimates.^[4] Sales rose 8.6% year-over-year.
The company did forecast slower growth ahead between 2% and 8% next quarter. However, Amazon said it would cut over 18,000 jobs in the latest sign that Big Tech is tightening belts amid economic uncertainty.^[5]
“The announced workforce reductions reflect difficult decisions made to align with customer demand,” said BMO Capital Markets analyst Daniel Salmon.^[6]
Table 1: Key Tech Earnings Results
| Company | Revenue (Billion) | EPS | Reaction |
|---|---|---|---|
| Meta | $32.17 | $3.11 | Stock up over 20% |
| Amazon | $149.2 | $0.03 | Stock up nearly 8% |
Strong January Jobs Report Spooks Markets
The latest jobs numbers showed the U.S. economy adding a staggering 517,000 jobs in January, nearly triple economist estimates. ^[7] It marked the biggest monthly jobs gain since July and lowered the unemployment rate to 3.4%, tying a 53-year low.
The red-hot report reinforces the idea that the economy remains strong despite high interest rates aimed at cooling growth and inflation. Markets are now betting the Fed could raise its benchmark rate above 5% in the coming months before cutting later this year.^[8]
Nasdaq Leads Gains as Rates Retreat
The Nasdaq composite jumped over 2%, leading markets higher thanks to strong performances from tech and growth stocks like Meta, Amazon, Apple, and Nvidia. These stocks are more sensitive to interest rates.
In turn, benchmark 10-year Treasury yields pulled back nearly 4 basis points to around 3.40% after hitting a three-month high on Wednesday. Lower rates provide support, especially for unprofitable tech companies reliant on financing.^[9]
Continued mixed economic signals mean “uncertainty and volatility are set to remain high,” UBS analysts said in a note. Still, markets welcomed the reprieve after January’s selloff.
Outlook Hazy But Room For Optimism
Markets face crosswinds early in 2023 amid rising layoffs contrasting with tight labor markets, slowing inflation and growth going against still-high rates threatening profits.
However, Nasdaq futures point to additional gains to open next week after this week’s big tech earnings and rally.^[10] Investors are betting the worst is over for tech while viewing cost-cutting as prudent.
At the same time, strong employment and wages suggest consumers can weather the economic storms. JPMorgan analysts called recession fears “overblown,” noting household balance sheets remain healthy.^[6]
There are still clouds, like the strong jobs data keeping the Fed hawkish or renewed China lockdowns threatening supply chains anew. But resilient tech earnings and optimistic analyst takes provide room for markets to build on this week’s gains.
Footnotes
- https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-jobs-report-amazon-apple-amazon-tesla-stock/
- https://finance.yahoo.com/news/stock-market-today-stocks-mostly-rise-after-jobs-report-blowout-tech-windfall-134422767.html
- https://www.rttnews.com/3421571/u-s-stocks-may-extend-rebound-on-meta-amazon-results.aspx
- https://www.barchart.com/story/news/23801065/markets-today-stocks-higher-on-strong-tech-earnings-despite-hot-payroll-report
- https://www.wsj.com/livecoverage/stock-market-today-dow-jones-earnings-02-02-2024
- https://finance.yahoo.com/news/stock-market-today-us-futures-pop-after-tech-windfall-with-jobs-report-on-deck-123300351.html
- https://www.wsj.com/livecoverage/stock-market-today-dow-jones-earnings-02-02-2024
- https://www.rttnews.com/3421571/u-s-stocks-may-extend-rebound-on-meta-amazon-results.aspx
- https://finance.yahoo.com/news/marketmind-tech-tnotes-meta-surges-110553530.html
- https://finance.yahoo.com/news/stock-market-today-us-futures-pop-after-tech-windfall-with-jobs-report-on-deck-123300351.html
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