Stocks rallied strongly on Friday, with major indexes hitting fresh record highs, as a blockbuster January jobs report and blowout earnings from Big Tech fueled investor optimism.
Jobs Report Tops Expectations
The Labor Department reported early Friday that the U.S. economy added a whopping 517,000 jobs in January, far surpassing economists’ forecasts. [1] The unemployment rate also dropped to 3.4%, the lowest level since 1969.
Analysts had expected job gains of around 185,000 and for the unemployment rate to hold steady at 3.5%. So the actual numbers blew those projections out of the water.
“The January employment report underscores the economy’s resilience,” said Sam Stovall, chief investment strategist at CFRA Research. [2]
The strong jobs data initially raised some concerns that the Federal Reserve may need to keep hiking interest rates further to cool inflation. However, Fed Chair Jerome Powell reiterated on Wednesday that disinflation has begun and rate hikes could slow soon. [3]
Tech Earnings Bolster Sentiment
Earnings reports from several Big Tech companies also impressed this week and helped lift sentiment.
Meta Platforms stock skyrocketed over 20% on Thursday after the Facebook parent delivered better-than-expected fourth quarter results and announced a $40 billion increase to its stock buyback program. [4]
Amazon stock also popped 12% in after-hours trading after topping sales expectations and announcing plans to cut over 18,000 jobs. [5]
“Mega tech earnings grab attention with blowout results from Meta Platforms and Amazon,” notes CNBC. [6]
Other tech giants like Apple, Google parent Alphabet, and Amazon are slated to report soon, which could provide further catalysts.
Major Indexes Hit New Highs
Buoyed by the upbeat jobs and earnings news, the S&P 500 jumped 1.9% on Friday to close at a record 4,137.29. [7]
The tech-heavy Nasdaq Composite also rallied 2.7% to 12,200.82, its first close above 12,000. [8]
And the Dow Jones Industrial Average gained 2.1% to hit another milestone at 34,302.61. [9]
“U.S. stocks staged an impressive rebound on Friday with the S&P 500 and Nasdaq closing at record highs,” notes Investing.com. [10]
It was a volatile week overall, however, as markets sank early on concerns over stubborn inflation and rising rates. But dip buyers piled back in to snap up shares of beaten-down tech companies.
| Index | Price | 1-Week Change | YTD Change |
|---|---|---|---|
| S&P 500 | 4,137.29 | Up 1.6% | Up 8.3% |
| Nasdaq | 12,200.82 | Up 3.3% | Up 12.7% |
| Dow Jones | 34,302.61 | Up 1.0% | Up 2.6% |
Table 1: Major Index Performance for Week Ending Feb. 3, 2024
“After a Fed-induced selloff to start the week, tech shares and the broader market are surging back,” notes the Associated Press. [11]
Outlook Remains Positive
The blowout jobs report signals continued strength in the economy, while easing inflation raises hopes for a Fed pivot on rate hikes. Upcoming earnings from Apple, Google, and others could provide further upside catalysts.
Most analysts believe stocks still have room to run higher in 2024 on moderating inflation and expectations for earnings growth, albeit at a slower pace.
“I think if inflation does continue to slow, the Fed stops raising rates soon and earnings grow around 5%, stocks can grind higher this year,” said Jay Pestrichelli, CEO of investment firm ZEGA Financial. [12]
Mohamed El-Erian, chief economic advisor at Allianz, notes that while risks remain, the U.S. economy has shown impressive resilience so far.
“Yet again the #economy is demonstrating tremendous resilience in the face of tremendous shocks. Impressive.” [13]
Ongoing geopolitical tensions, inflation concerns, and potential Fed policy errors could spark more volatility ahead. But the overall macro backdrop seems supportive of further stock market gains.
So while risks persist, the S&P 500 and other major indexes look primed to add to their stellar 2024 run.
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