The stock market roared to fresh record highs over the past week, driven by blowout earnings from big tech companies like Meta Platforms as well as a red-hot January jobs report. The S&P 500 gained over 3% on the week, hitting its highest levels ever.
Meta Shares Skyrocket After Earnings Beat
Shares of Meta Platforms, formerly known as Facebook, soared an astonishing 23% in a single day after the company reported fourth quarter results that beat Wall Street expectations.
Meta delivered earnings per share of $3.67 compared to expectations of $3.22. Revenue came in at $32.17 billion versus estimates of $31.55 billion. The social media giant also announced a new $40 billion stock buyback program.
While Meta’s user growth disappointed, investors cheered the company’s progress on AI and virtual reality initiatives. Meta’s Reality Labs segment, which includes its VR business, generated over $727 million in revenue during the quarter.
CEO Mark Zuckerberg said on the earnings call: “I’m pleased with the strong results and progress our company demonstrated in 2022 as we navigate this historic economic and technological transition.”
Amazon, Apple, Alphabet Also Post Strong Results
Meta’s blowout earnings capped a robust week of tech results that also lifted shares of Amazon, Apple, and Alphabet.
Amazon delivered record revenue above $149 billion in the holiday quarter. Though the ecommerce leader posted its first quarterly loss since 2015, investors shrugged it off amidst optimism over Amazon’s fast-growing cloud computing division.
Meanwhile, Apple’s 5% revenue growth to $117 billion trounced expectations. The iPhone maker also announced plans to manufacture more products in the U.S. going forward.
Not to be outdone, Google parent Alphabet surpassed $75 billion in quarterly revenue for the first time ever. YouTube advertising was a standout performer, generating over $7.9 billion.
January Jobs Report Tops Expectations
Adding fuel to the stock market’s rally was a blockbuster January jobs report that showed the U.S. economy adding a staggering 517,000 jobs last month versus estimates of 187,000.
The unemployment rate also fell to 3.4%, the lowest since 1969.
Average hourly wages jumped 0.3% as workers continue to see pay increases despite high inflation.
The red-hot jobs data affirms the resilience of the U.S. labor market even in the face of aggressive Federal Reserve interest rate hikes aimed at cooling inflation.
While the report likely gives the Fed more room to keep tightening monetary policy without tanking the economy, markets are betting the central bank can pull off a mythical “soft landing” where inflation comes down without triggering a recession.
S&P 500 Hits Record High as Bulls Stay in Charge
Propelled higher by surging tech stocks and optimism over the health of Corporate America and U.S. consumers, the S&P 500 closed out the week at an all-time peak above 4,100.
The Dow Jones Industrial Average also rallied over 700 points on Friday to notch its biggest weekly gain of 2024 so far.
Behind the scenes, dip buyers aggressively stepped in to buy stocks during intraweek pullbacks. According to data from Vanda Research, retail investors plowed $2.5 billion into U.S. equities on Thursday and Friday as markets bounced.
With fourth quarter earnings season now past the halfway point, nearly 70% of S&P 500 companies have beat analysts profit expectations. Earnings growth for the index now stands at 2.9%, much improved from expectations for a 3.9% decline earlier in reporting season.
The market’s ability to power higher even in the face of hot economic data that could allow the Fed to keep hiking rates shows remarkable resilience that has bulls believing more upside lies ahead.
“The market is telling us it expects the soft landing scenario to play out where growth remains positive and inflation slowly drifts lower allowing the Fed to cut rates later this year,” noted LPL Financial Chief Market Strategist Ryan Detrick.
Market Volatility Ahead with CPI Report Next Week
Though stocks ended last week on a definitive high note, the path ahead remains bumpy.
Next week brings the release of January’s Consumer Price Index reading on Tuesday in what will be a critical update on whether inflation pressures are continuing to cool down.
Economists predict CPI increased by 0.5% month-over-month. However, an upside surprise could reignite fears of more aggressive Fed policy tightening which could spark another pullback across risk asset markets.
Indeed, stocks saw increased volatility over the past month amidst swirling recession worries tied to the Fed’s monetary policy clampdown.
The Cboe Volatility Index, or VIX, spiked above 25 on an intraday basis multiple times in January as investors reacted to hawkish Fed speak and mixed economic data.
While stocks have shown impressive resilience so far in 2023 amid better-than-feared earnings, lingering uncertainties over where inflation and rates are heading next could bring back turbulent trading conditions at times.
“Markets face ongoing risks tied to central bank policies aimed at lowering inflation globally which could impact earnings and valuations if an economic downturn ensues,” warned Wells Fargo Investment Institute Head of Equity Strategy Chris Haverland.
For now, bulls remain in clear control as strong corporate profits provide cover for the Fed to stick to its tightening campaign a while longer. But another hot inflation report or renewed recession chatter could quickly darken the sunny sentiment currently lifting stocks back near all-time highs.
| Date | Index | Price | Daily Change | Weekly Change |
|---|---|---|---|---|
| Feb 3, 2024 | S&P 500 | 4,136 | +1.1% | +3.05% |
| Feb 3, 2024 | Dow Jones | 34,117 | +0.54% | +1.18% |
| Feb 3, 2024 | Nasdaq | 12,153 | +1.75% | +4.28% |
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