U.S. equity markets are mixed following strong earnings from Amazon.com, Inc. ( AMZN ) that lifted the Nasdaq while a blowout jobs report pushed bond yields higher by fueling fears of bigger interest rate hikes by the Federal Reserve.
- Tech shares are rising, boosted by Amazon and Snap, as the Nasdaq aims for its first weekly gain this year.
- A blowout jobs report pushed bond yields higher by fueling fears of bigger interest rate hikes by the Federal Reserve.
- Crude oil’s price surge continued, with the price crossing $93 per barrel.
The yield on the 10-year Treasury note is skyrocketing nine basis points (BPS) to 1.92% after the Labor Department reported that many more jobs were created in January than expected (more below). That’s prompting speculation that the Fed might raise interest rates more than 25 BPS at its meeting next month.
Concerns about higher borrowing costs are sending shares of D.R. Horton, Inc. ( DHI ) and other homebuilders tumbling. Shares of The Clorox Company ( CLX ) and Ford Motor Company ( F ) are declining as their earnings came up short of estimates. Meta Platforms, Inc. ( FB ) shares continue to struggle, down another 2%.
Amazon’s better-than-expected profit report is boosting its shares and other tech shares, including Salesforce.com, Inc. ( CRM ), Microsoft Corporation ( MSFT ), and Tesla, Inc. ( TSLA ). Snap shares are up 50% on its earnings news.
Energy company stocks are among the best performers in the S&P 500, as oil futures are above $92 per barrel. They haven’t been that high since the summer of 2014.
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Jobs Jump: Chart of the Day
The U.S. economy added a surprisingly large number of jobs last month, as more Americans went to work in restaurants, bars, and other services businesses even as the country faced heightened concerns about the omicron variant of COVID-19.
The Labor Department reported 467,000 jobs were created in January. Economists had anticipated a gain of about 150,000, with some forecasting a loss because of the spread of omicron. The Labor Department also made significant revisions to the November and December reports, increasing their previous estimates by a total of more than 700,000 jobs.
The January unemployment rate ticked up 0.1 percentage point to 4%. The gains in hiring were led by the leisure and hospitality sector, which added 151,000 positions. Most of those (+108,000) were at food services and drinking places. Other sectors showing large increases in employment were professional and business services (+86,000), retail trade (+61,000), and transportation and warehousing (+54,000). Sectors that had declines were construction (-5,000), motor vehicles and parts (-4,900), and mining and logging (-4,000).
The labor force participation rate rose to 62.2%, the highest it’s been since the COVID-19 pandemic hit in March 2020. Average hourly earnings in private sector jobs increased $0.23 to $31.63. They were up 5.7% from a year ago.
Snap (SNAP): Stock of the Day
Snap shares are soaring 50% after the social media company reported its first-ever quarterly net profit and added more users than expected.
The owner of the Snapchat instant messaging app said that it had fourth quarter earnings per share (EPS) of $0.22, and revenue rose 42% to $1.3 billion. Daily active users (DAU) increased 20% to 319 million, while average revenue per user (ARPU) was $4.06, up from $3.44 the year before. All were better than analysts’ estimates. Snap also predicted current quarter revenue and DAU that beat forecasts.
CFO Derek Andersen noted that Snap’s direct response advertising business has recovered “quicker than we anticipated” from Apple’s iOS privacy changes. On Wednesday, Meta Platforms warned Apple's changes would cost the Facebook parent $10 billion in sales in 2022.
Snap shares had fallen to a 16-month low in yesterday’s tech sell-off, and even with today’s gains the shares have lost more than one-third of their value in the past year.
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