Stocks up as Meta surges 14%, Amazon 8% after hours
* Bank of England extols good news on inflation, but job not finished
* US jobless claims rise to a 2-month high as labour market cools, ahead of NFP
* Eurozone headline inflation falls but core disappoints
* Meta jumps on $50bn buyback and first dividend, Amazon beats estimates
FX: USD turned lower even though Powell pushed back on early rate cuts on Wednesday. The greenback followed yields down, which dropped for a fourth straight day making new lows for the year. The multi-month bottom made in December in the 10-year Treasury is near at 3.78%. Concerns continued to simmer about regional banks. Data was also more Fed-friendly, though ISM manufacturing unexpectedly rose.
EUR picked up after initially sliding to a six-week low below 1.08. Headline inflation fell in line with estimates but core beat expectations. Bets that the ECB will cut rates before the Fed as the US economy holds up better had caused a mild downtrend in the euro. Prices have made it back above the 200-day SMA at 1.0839.
GBP dipped to a low of 1.2625 before buyers stepped in after the BoE decision and press conference. The MPC modestly pushed back on rate cut bets adopting a slightly more hawkish tone due to persistent inflation. Two MPC members voted for a hike, but the bank says it will await further evidence of disinflation before cutting rates.
USD/JPY fell to a two-week low at 145.89 before retracing above 146. Yields have pulled back off their lows while a safe haven bid remains. The yen also found support from chatter about pay raises above 6%. That would boost wage growth and potentially force the BoJ to normalise policy.
AUD hit a ten-week low at 0.6508 before it rallied. Buyers have taken the major back to its recent range, and it continues to trade around the 200-day SMA at 0.6574. The RBA meet next week with more than a 50% chance of a rate cut by May. USD/CAD below 1.34 with the loonie the strongest major on the day. This week’s low is at 1.3358.
Stocks: US equities rebounded strongly. The benchmark S&P 500 added 1.25% to settle at 4,906. The tech-dominated Nasdaq 100 closed 1.21% higher to finish at 17,344. The Dow Jones gained 0.97% closing at 38,519. Earnings were mixed with Merck adding 4.5% with a beat on revenue while Qualcomm lost 5% even though earnings topped expectations. After the closing bell, Meta soared as it topped estimates and declared a first dividend. Facebook’s parent enjoyed the biggest y/y quarterly growth in more than two years and record revenues. Amazon quarterly sales surged on strong holiday shopping while cloud revenue jumped. Apple was mixed after hours after it earnings saw a return to growth but a sharp miss on China revenue.
Asian futures are in the green. APAC stocks traded mixed after Wall Street losses on banking sector concerns. Powell’s rate cut pushback also didn’t help risk sentiment. China Caixin PMI topped estimates and showed the manufacturing sector expanding for a third straight month. The AX 200 retraced from record highs amid softer data and weakness in tech. Chinese indices were mixed as early upside on the better PMI faded.
Gold enjoyed a decent day, though gains were pared into the close, after yields continued to plummet. The 50-day SMA at $2031 has proved useful support. A strong close could see the late December top at $2088 come into view.
Day Ahead – NFP expected to show solid job gains
Headline non-farm payrolls are seen slowing to around 180,000 from the 216,000 in December. This is less than the three-month average of job gains of 165,000, which is its lowest level since the start of 2021. Four of the last five headline prints have beaten expectations and revisions are always worth watching.
Ongoing wage gains are expected with average hourly earnings unchanged from the pace seen pretty much over the most of the last 12 months. That equates to a steady annual rate of 4.1%. The jobless rate is likely to rise modestly to 3.8% in January which would represent a three-month top. But it is still not that far away from recent historic lows.
Other labour market data appear to be relatively strong. Weekly initial jobless claims were little changed between the December and January nonfarm reference periods though ticked up yesterday. Layoffs have remained low, while JOLTS job vacancies are falling but remain above pre-pandemic levels.
Chart of the Day – Nasdaq rebounds swiftly
The tech-filled Nasdaq 100 index has had a choppy week with a big sell-off from the record highs followed by yesterday’s 1%+ gain. Results have been mixed with Alphabet and AMD plunging as US tech companies failed to meet Wall Streets’s lofty expectations. The Fed’s pushback on rate cuts is ordinarily not a positive driver either for the tech sector who generally have high valuations based on future profits. But futures are well in the green ahead of NFP after Amazon and Meta’s earnings.
The recent sell-off eased overbought conditions and took the index back to a Fib level (38.2) of this year’s rally at 17,124. The bounce back has reached a minor retracement level at 17,331. Record highs are 17,665 and all-time best close at 17,596.