Stop Drop By Meta May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with stocks likely to give back ground after closing higher for four consecutive sessions.

Technology stocks are likely to lead the pullback on Wall Street after helping drive the rally seen over the past several sessions.

A steep drop by Meta (FB) is likely to weigh on the tech sector, with the Facebook parent plunging by 23.1 percent in pre-market trading.

Meta is under pressure after the social media giant reported weaker than expected fourth quarter earnings and provided disappointing revenue guidance for the current quarter.

Audio streaming company Spotify (SPOT) is also likely to see initial weakness after reporting a narrower than expected fourth quarter loss but issuing a weaker than expected subscriber forecast.

Traders may also cash in on some of the recent strength in the markets ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Stocks moved mostly higher over the course of the trading day on Wednesday, extending the strong upward move seen over the three previous sessions. With the continued advance, the Nasdaq and the S&P 500 climbed further off last week’s multi-month lows.

The major averages all finished the day firmly in positive territory. The Dow climbed 224.09 points or 0.6 percent at 35,629.33, the Nasdaq rose 71.54 points or 0.5 percent to 14,417.55 and the S&P 500 advanced 42.84 points or 0.9 percent to 4,589.38.

The continued strength on Wall Street partly reflected a positive reaction to upbeat earnings from some big-name companies like Google parent Alphabet (GOOGL).

Shares of Alphabet spiked by 7.5 percent after the tech giant reported fourth quarter result that exceeded analyst estimates on both the top and bottom lines.

Alphabet also announced a 20-for-1 stock split, which has led to speculation the stock could be headed for inclusion in the Dow.

Chipmaker Advanced Micro Devices (AMD) also showed a strong move to the upside after reporting better than expected fourth quarter results and providing upbeat guidance.

Meanwhile, shares of PayPal (PYPL) moved sharply lower after the payment service reported weaker than expected fourth quarter earnings and provided disappointing guidance.

Traders were also reacting to a report from payroll processor ADP unexpectedly showing a sharp pullback in U.S. private sector employment in the month of January.

ADP said private sector employment plunged by 301,000 jobs in January after jumping by a downwardly revised 776,000 jobs in December.

The steep drop surprised economists, who had expected private sector employment to increase by 207,000 jobs compared to the spike of 807,000 jobs originally reported for the previous month.

“The labor market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth,” said ADP chief economist Nela Richardson.

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.

Economists currently expect employment to rise by 150,000 jobs in January after climbing by 199,000 jobs in December. The unemployment rate is expected to hold at 3.9 percent.

Semiconductor stocks moved sharply higher following the upbeat earnings news from AMD, with the Philadelphia Semiconductor Index surging up by 2.5 percent.

Interest rate-sensitive real estate and utilities stocks also saw considerable strength, as the unexpected slump in private sector jobs eased concerns about the Federal Reserve aggressively raising rates.

Reflecting the strength in the sectors, the Dow Jones U.S. Real Estate Index and the Dow Jones Utility Average climbed 1.4 percent and 1.3 percent, respectively.

Natural gas, pharmaceutical and healthcare stocks also moved notably higher, while oil service stocks moved to the downside despite an uptick by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are tumbling $1.08 to $87.18 a barrel after inching up $0.06 to $88.26 a barrel on Wednesday. Meanwhile, after climbing $8.80 to $1,810.30 an ounce in the previous session, gold futures are falling $7.50 to $1,802.80 an ounce.

On the currency front, the U.S. dollar is trading at 114.80 yen versus the 114.46 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1340 compared to yesterday’s $1.1305.

Asia

Asian stocks retreated on Thursday after Meta, which owns Facebook, Instagram and WhatsApp, missed on Wall Street earnings estimates and offered a weaker-than-expected forecast. Chinese and Hong Kong markets remained closed for the Lunar New Year.

Shares of Meta dropped by more than 20 percent in after-hours trading on Wednesday, knocking almost US$200 billion off its valuation.

Investors also awaited U.S. January employment data, due out Friday, for direction after the ADP jobs data surprised to the downside.

Japanese shares snapped a four-day rally as technology stocks retreated amid a steep drop by the Nasdaq futures. The Nikkei 225 Index slid 292.29 points, or 1.1 percent, to 27,241.31, while the broader Topix closed 0.9 percent lower at 1,919.92.

Tokyo Electron, Screen Holdings and Advantest gave up 2-4 percent. Heavyweight Fast Retailing, the operator of the Uniqlo casual clothing chain, tumbled 3.7 percent after reporting a decrease in its domestic sales in January.

Australian markets ended slightly lower as selling resumed in technology stocks after Meta’s weak earnings and forecast miss.

The benchmark S&P/ASX 200 Index slipped 9.70 points, or 0.1 percent, to 7,078, while the broader All Ordinaries Index ended down 25 points, or 0.3 percent, at 7,374.60. Xero fell 5 percent, Wosetech Global slumped 8 percent and Block Inc. lost 9.8 percent.

Lender Westpac gained 2.3 percent after it reported progress on cost-cutting measures. Rising copper prices lifted miners, with BHP and Rio Tinto climbing 2-3 percent.

Seoul stocks jumped the most in over two months as markets reopened from holidays and data showed the country’s factory activity grew at the sharpest pace in 6 months.

The Kospi rallied 44.48 points, or 1.7 percent, to 2,707.82, marking the sharpest gain since last December. SK Hynix, Naver and LG Chem soared 3-6 percent.

Europe

European stocks are moving lower on Thursday as technology stocks fall after Facebook parent Meta’s weak earnings and forecast miss.

Tightening jitters and inflationary pressures are also weighing on the markets a day after data showed Eurozone inflation rose to a record high last month.

The Eurozone composite purchasing managers index dropped to 52.3 in January from 53.3 in December, reflecting softer growth among service providers due to constraints resulting from the Covid-19 pandemic, IHS Markit said.

On the monetary policy front, the Bank of England resorted to back-to-back interest rate hike amid rising inflation and signaled “modest tightening” in the months ahead, while the European Central Bank left rates unchanged.

While the U.K.’s FTSE 100 Index is down by 0.2 percent, the German DAX Index is down by 0.3 percent and the French CAC 40 Index is down by 0.4 percent.

German semiconductor company Infineon Technologies has plunged despite reporting higher first quarter profits and lifting its full-year revenue outlook.

Rational AG has also dropped. The company said it expects the volatile situation in materials procurement to persist in 2022.

Swiss drug maker Roche has also shown a notable move to the downside after saying it sees slower sales growth in 2022.

Nokia has alsumped. The Finnish telecoms equipment maker reported a fourth quarter profit of 680 million euros compared to last year’s hefty loss of 2.70 billion euros.

ING Group has also come under pressure. The Dutch bank reported higher-than-expected provisions in its fourth quarter.

Future Plc shares have also tumbled. The media firm said in a trading update that its performance for the four-month period to January 31 was in line with its expectations.

Telecommunications firm BT has also sank after it entered exclusive discussions with Discovery (DISCA) to create a joint venture between BT Sport and pan-European TV network Eurospor.

On the other hand, Sweden’s Skanska has moved sharply higher. The builder posted quarterly profit that beat market forecasts.

Shell has also advanced. The oil major reported a sharp upswing in full-year profit, raised dividend and announced a share buyback program.

Catering contractor Compass Group has also surged after its performance in the first quarter of fiscal 2022 improved from the previous quarter.

Publicis Groupe has also jumped. The French advertising agency company expects first quarter organic growth to be slightly above the full year guidance range.

Aerospace firm Thales has also moved ihgher. Commenting on the rumors about the potential interest of acquiring Atos’s cyber-security business, the company said there is no such discussion going on with Atos.

U.S. Economic Reports

A day ahead of the release of the more closely watched monthly jobs report, the Labor Department released a report on Thursday showing a modest decrease by first-time claims for U.S. unemployment benefits in the week ended January 29th.

The report showed initial jobless claims dipped to 238,000, a decrease of 23,000 from the previous week’s revised level of 261,000.

Economists had expected jobless claims to edge down to 245,000 from the 260,000 originally reported for the previous week.

Reflecting a spike in output, the Labor Department released a separate report showing U.S. labor productivity rebounded by much more than anticipated in the fourth quarter of 2021.

The report said labor productivity soared by 6.6 percent in the fourth quarter after tumbling by a revised 5.0 percent in the third quarter.

Economists had expected productivity to jump by 3.2 percent compared to the 5.2 percent nosedive that had been reported for the previous quarter.

Meanwhile, the Labor Department said unit labor costs edged up by 0.3 percent in the fourth quarter after skyrocketing by a revised 9.3 percent in the third quarter.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of January.

The ISM’s services PMI is expected to drop to 59.5 in January from 62.0 in December, although a reading above 50 would still indicate growth.

The Commerce Department is also due to release its report on new orders for manufactured goods in the month of December at 10 am ET. Factory orders are expected to inch up by 0.1 percent.

Stocks In Focus

Shares of Biogen (BIIB) are seeing pre-market weakness after drugmaker reported better than expected fourth quarter results but provided disappointing guidance.

Industrial conglomerate Honeywell (HON) may also move to the downside after reporting fourth quarter earnings that exceeded estimates but weaker than expected revenues. The company also provided a downbeat full-year outlook.

On the other hand, shares of T-Mobile US (TMUS) are moving sharply higher in pre-market trading after the mobile service provider reported better than expected fourth quarter earnings and provided upbeat guidance.

Pharmaceutical distributor McKesson (MCK) may also see initial strength after reporting fiscal third quarter results that beat expectations on both the top and bottom lines.