Jobs Data, Disappointing Tech Earnings May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a notably lower open on Friday, with stocks likely to give back ground after moving sharply higher over the past few sessions.

Renewed concerns about the outlook for interest rates may weigh on Wall Street following the release of much stronger than expected jobs data.

The Labor Department’s closely watched monthly jobs report said non-farm payroll employment soared by 517,000 jobs in January after surging by an upwardly revised 260,000 jobs in December.

Economists had expected employment to increase by 185,000 jobs compared to the addition of 223,000 jobs originally reported for the previous month.

The report also said the unemployment rate edged down to 3.4 percent in January from 3.5 percent in December. The dip surprised economists, who had expected the unemployment rate to inch up to 3.6 percent.

While the report points to continued strength in the labor market, the data may raise concerns the Federal Reserve will raise interest rates higher than currently anticipated.

The downward momentum on Wall Street also comes amid a negative reaction to earnings news from several big-name tech companies.

Shares of Amazon (AMZN) are plunging by 5.6 percent in pre-market trading after the online retail giant report better than expected fourth quarter revenues but provided disappointing guidance for the current quarter.

Google parent Alphabet (GOOGL) is also seeing significant pre-market weakness after reporting weaker than expected fourth quarter earnings.

Shares of Apple (AAPL) may also move to the downside after the tech giant reported fiscal first quarter results that missed analyst estimates on both the top and bottom lines.

Stocks moved mostly higher during trading on Thursday, extending the rally seen late in Wednesday’s session. Tech stocks helped lead the advance, resulting in a substantial increase by the Nasdaq.

The tech-heavy Nasdaq soared 384.50 points or 3.3 percent to a nearly five-month closing high of 12,200.82, while the S&P 500 jumped 60.55 points or 1.5 percent to 4,179.76, it’s best closing level in over five months.

Meanwhile, the narrower Dow spent most of the day in negative territory, with the blue chip index edging down 39.02 points or 0.1 percent to 34,053.94.

The surge by the Nasdaq came as Meta Platforms (META) led a tech sector rally, with the Facebook parent skyrocketing by 23.3 percent to a nearly eight-month closing high.

The spike by Meta came after the company reported better than expected fourth quarter revenues and announced a $40 billion stock buyback.

Stocks also continued to benefit from a positive reaction to the Federal Reserve’s interest rate announcement on Wednesday, with traders expressing optimism the Fed is nearing the end of its rate hiking cycle.

At the same time, the Dow bucked the uptrend due partly to a notable decline by shares of Merck (MRK), which tumbled by 3.3 percent after the drug giant provided disappointing guidance.

Traders were also looking ahead to the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expected employment to increase by 185,000 jobs in January after jumping by 223,000 jobs in December, while the unemployment rate is expected to inch up to 3.6 percent from 3.5 percent.

A day ahead of the monthly report, the Labor Department released a report unexpectedly showing another modest decrease by first-time claims for U.S. unemployment benefits in the week ended January 28th.

The report said initial jobless claims edged down to 183,000, a decrease of 3,000 from the previous week’s unrevised level of 186,000. The dip surprised economists, who had expected jobless claims to climb to 200,000.

Jobless claims declined for the fourth time in five weeks, falling to their lowest level since hitting 181,000 in the week ended April 23, 2022.

A separate report released by the Labor Department showed U.S. labor productivity surged by more than expected in the fourth quarter of 2022.

Airline stocks moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 5.7 percent to its best closing level in almost eight months.

Substantial strength was also visible among software stocks, as reflected by the 3.8 percent spike by the Dow Jones U.S. Software Index. With the jump, the index reached a five-month closing high.

Housing stocks also saw significant strength on the day, resulting in a 3.3 percent surge by the Philadelphia Housing Sector Index. The index ended the session at its best closing level in a year.

Retail, computer hardware and semiconductor stocks also showed strong moves to the upside, while energy and gold stocks bucked the uptrend.

Commodity, Currency Markets

Crude oil futures are slipping $0.36 to $75.52 a barrel after sliding $0.53 to $75.88 a barrel on Thursday. Meanwhile, after falling $12 to $1,930.80 an ounce in the previous session, gold futures are slumping $15.40 to $1,915.40 an ounce.

On the currency front, the U.S. dollar is trading at 129.80 yen versus the 128.68 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0851 compared to yesterday’s $1.0910.

Asia

Asian stocks ended mixed on Friday, as U.S. tech giants reported disappointing earnings and investors awaited key U.S. jobs data later in the day for additional clues on the health of the world’s largest economy and the interest rate outlook.

The dollar traded firm after both the European Central Bank and the Bank of England hiked their rates by 50 basis points, and U.S. tech giants Apple, Google parent Alphabet and Amazon all reported lackluster financial results late on Thursday.

Chinese shares fell even as a private survey showed services sector activity in the country expanded for the first time in five months in January.

The benchmark Shanghai Composite Index dropped 0.7 percent to 3,263.41, while Hong Kong’s Hang Seng Index tumbled 1.4 percent to 21,660.47.

Japanese shares eked out modest gains to close at a seven-week high after a survey showed activity in the country’s services sector grew at its fastest pace in three months in January.

The Nikkei 225 Index rose 0.4 percent to 27,509.46, marking its highest close since December 16. The broader Topix ended 0.3 percent higher at 1,970.26.

Sony Group shares soared 6.2 percent after the company raised its operating profit forecast, citing strong results in its key gaming sector. ANA Holdings added 1.7 percent after it swung back to a half-year profit.

Z Holdings jumped 12 percent after announcing a merger with messaging app company Line Corp. and internet firm Yahoo Japan. Panasonic Holdings lost 3.1 percent after cutting its full-year outlook.

Seoul stocks ended higher for a third day running on robust foreign buying. The Kospi settled 0.5 percent higher at 2,480.40. Internet portal operator Naver climbed 5.7 percent despite reporting weak fourth-quarter earnings.

Australian markets finished notably higher to mark their fifth straight weekly gain as investors awaited a slew of corporate earnings and the outcome of next week’s RBA meeting.

The benchmark S&P/ASX 200 Index rose 0.6 percent to 7,558.10, while the broader All Ordinaries Index closed 0.6 percent higher at 7,771.80.

Banks and energy stocks rose, offsetting weakness in the mining sector. Gold miners slumped as a stronger dollar impacted bullion prices. Newcrest, Northern Star Resources and Regis Resources gave up 3-7 percent.

Europe

European stocks are turning in a mixed performance on Friday, as investors digest key tech earnings released after the U.S. markets closed on Thursday.

While the U.K.’s FTSE 100 Index is up by 0.4 percent, the French CAC 40 Index is down by 0.3 percent and the German DAX Index is down by 0.5 percent.

French drug major Sanofi has moved sharply lower. The company expects business earnings per share to grow in the low single digits at CER in fiscal 2023, barring unforeseen major adverse events.

On the other hand, TomTom NV has surged after reporting a narrower fourth-quarter net loss.

In economic news, Eurozone producer price inflation eased for the fourth consecutive month in December to the lowest level in just over a year, as energy prices continued to rise at a slower rate, data from the statistical office Eurostat showed.

The producer price index registered an annual increase of 24.6 percent after a revised 27.0 percent surge in November. Economists had forecast inflation to ease to 22.5 percent.

U.S. Economic Reports

Job growth in the U.S. unexpectedly showed a substantial acceleration in the month of January, according to a closely watched report released by the Labor Department on Friday.

The Labor Department said non-farm payroll employment soared by 517,000 jobs in January after surging by an upwardly revised 260,000 jobs in December.

Economists had expected employment to increase by 185,000 jobs compared to the addition of 223,000 jobs originally reported for the previous month.

The report also said the unemployment rate edged down to 3.4 percent in January from 3.5 percent in December. The dip surprised economists, who had expected the unemployment rate to inch up to 3.6 percent.

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 inch up to 50.3 in January from 49.6 in December, with a reading above 50 indicating growth in the sector.

Stocks In Focus

Shares of Ford (F) are moving sharply lower in pre-market trading after the auto giant reported fourth quarter earnings that fell well short of analyst estimates.

Coffee giant Starbucks (SBUX) may also move to the downside after reporting weaker than expected fiscal first quarter results.

Meanwhile, shares of Nordstrom (JWN) are soaring in pre-market trading after a report from the Wall Street Journal said activist investor Ryan Cohen is amassing a sizable stake in the retailer.

Cleaning products company Clorox (CLX) may also see initial strength after reporting fiscal second quarter results that exceeded expectations on both the top and bottom lines.