Market Movers:
In a dramatic shift of fortunes, the stock market witnessed an exuberant rally led by technology behemoths Meta and Amazon. These two giants not only exceeded earnings expectations but also propelled their combined market valuation upwards by a staggering $280 billion. The surge was a result of Meta’s profits tripling and Amazon swinging back to a substantial full-year profit, underpinned by robust sales in their high-margin segments. This turnaround has been a beacon of optimism, highlighting the enduring strength of tech giants amid broader market uncertainties.
The upbeat earnings reports from Meta and Amazon infused positive sentiments across global markets, with Nasdaq 100 futures climbing by 1% in Asia. This rise was particularly notable, providing a silver lining to an otherwise turbulent week.
The US dollar found itself on the back foot as investors’ appetite for riskier assets swelled, fuelled by the impressive performance of big tech companies. The anticipation of the US jobs data further influenced currency markets, with traders keenly watching for signals that might prompt the Federal Reserve to adjust interest rates.
The upcoming Nonfarm Payrolls report is anticipated to reveal the US added 180,000 jobs in January 2024, a decrease from December’s 216,000 jobs. The Unemployment Rate is expected to slightly increase to 3.8% from December’s 3.7%. Average Hourly Earnings are projected to continue their 4.1% yearly rise, indicating steady wage inflation. This labour market data is crucial for determining the US Federal Reserve’s interest rate decisions, especially after the Fed strongly hinted at delaying a rate cut expected in March.
US Treasury yields experienced a notable shift, driven by changing expectations around Federal Reserve rate cuts. As the prospect of lower rates loomed, yields slid, reflecting a recalibration of market predictions in light of recent economic data and central bank signals. This movement in the bond market highlights the delicate balance investors are navigating, weighing the implications of monetary policy against economic indicators and market performance.
The S&P 500, Nasdaq, and Dow Jones Industrial Average all registered significant gains, buoyed largely by the tech sector’s robust performance. Companies like Meta and Amazon not only posted impressive earnings but also set a positive tone for the market, overshadowing recent concerns over economic slowdown and inflation. This resurgence in tech stocks has rekindled investor confidence, spotlighting the sector’s critical influence on broader market trends and investor sentiment.
The attack on US regional banks continues (this is the chart of the related ETF, KRE). Not surprisingly, the Russell is heavily underperforming other indices. However, the entire banking and financial sector is heavy, and not only in Europe.
BEWARE OF THE LONGS, especially in the sector.
Source: Matteo Marchetti, KTM Market Analyst
For all the latest market developments follow Matteo @MMTradingKTT and Key to Markets @keytomarkets on Telegram