US stocks rallied in after-hours trading on Thursday and continued to rise in pre-market trading today after yesterday's biggest earning day of the season with excellent results from Meta and Amazon. Meta is trading 17% (!) higher in pre-market trading, while Amazon is up 7%. Apple, which also reported yesterday, fell almost 3% after weakening sales in China and declining iPhone and Apple Services revenue. More positive results came from Snap (+6.5%) and Shopify (+4.5%). ExxonMobil and Chevon also rose slightly (0.65% – 0.85%), exceeding moderate expectations.
Besides the strong round of (big) tech earnings bringing back expectations that the rally in the Magnificent 7 (minus Tesla) + chips can continue, we see a market waiting for the latest US labor market data to be released today before the NYSE opens (NFP – 13:30 UTC+0).
Markets will be watching the NFP data closely to see if it shows that the labor market is indeed cooling. In recent years, the Non Farm Payrolls reported by the Bureau of Labor Statistics have always surprised to the upside, only to be revised downward the following month. In addition, a large portion of the additional jobs were government positions, so I question whether the data accurately reflects the actual performance of the US labor market. So we could see another slightly “positive” surprise, but we could also see a downward revision to last month's data. It's odd and looks suspiciously like a rehash.
Jobless claims rose yesterday, and the data should show that hiring slowed in January. There could also be a slight uptick in the unemployment rate. Although I doubt the quality of the data released, I expect the Fed to move closer and closer to conditions that would allow a rate cut. This would generally mean that a healthy decline in unemployment would most likely be the best outcome for Wall Street.
European stocks also rose, driven by US stocks and positive results from German car company Mercedes-Benz (+3.3%) and Danske Bank (+6.5%). In Asia, the picture was more mixed as the Chinese equity market remains fragile – but overall Asian equities also gained today.
The USD saw some weakness, weighed down in particular by falling yields and expectations of cool labor market data, as well as a slowly re-emerging concern about the health of US regional banks, which would certainly benefit from rate cuts. New York Community Bancorp plunged 45% after shocking investors on Wednesday by cutting its dividend, announcing a quarterly loss and increasing its commercial real estate loan-loss reserves.
With monetary conditions still tight, the very strong rally since January 2023 has pushed stocks to extreme levels, but recent tech gains are likely to keep the positive momentum going a little longer. We've also seen the rally in stocks (especially growth stocks) continue whether yields have risen or fallen (as they are now, which is good for growth stocks). It remains a problem for Wall Street that gains are so concentrated in a few big tech stocks – but I don't see heavy profit taking coming for now.
Elsewhere, the falling oil prices have left many oil investors with sharp losses. As I said in previous weeks – tailwinds for oil based on “only” geopolitical tension is very fragile support. We now see negotiations between Israel and Hamas to pause the conflict – which is also heavily pushed by the US and other players in the region. Gold continues to rise benefiting from falling yields due to higher demand for bonds. Bond demand may remain elevated amid concerns about US regional banks.
👁 ROB'S MARKET OVERVIEW:
February 02, 2024
⚠️ I expect NFP data to show a cooling of US labor data but not come in lower than expectations
🌐/🇺🇸 Global/US Markets ↗️/↕️/↗️ (volatility post NFP report, markets ending positively today)
Cyclical Stocks ↗️/↕️/↗️
Tech/Growth Stocks ↗️/↕️/↗️
Financial Stocks ➡️ (with some downside potential / underperfoming today)
Defensive Stocks ➡️
Energy Stocks ↗️/↘️ (solid start following solid earnings; then profit taking)
Materials Stocks ↗️/↘️
AUD, GBP, CAD ↗️/➡️ (strong gains following risk sentiment boost; Gains limited)
USD ↘️/↕️ (USD with some temporary weakness; will recover not later than next week)
JPY ↘️/↗️ (sharp losses / now limited downside potential during US trading)
⚡️Cryptos ➡️ (cryptos in sideways movement – range $42.5K – $43.5K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)