A Jobs Friday Blowout

By Connor Smith |  Friday, February 4 Overcoming Omicron. U.S. equities capped their second-straight week of gains as investors sized up a blowout "Jobs Friday" and a stellar report from Amazon.com. The S&P 500 gained 0.5% on the day to close out its best week since Dec. 23, 2021. The Dow Jones Industrial Average was mostly flat. The tech-heavy Nasdaq Composite jumped 1.6%. The U.S. economy added 467,000 jobs in January, according to the Labor Department. The figure blew past expectations of about 150,000,  surprising economists who were worried the Omicron variant would dampen the numbers. While the jobs report was positive for the economy, traders also needed to consider how it might steer monetary policy. Barron's Alexandra Scaggs writes that following the report, bond markets were selling off as the report bolstered a view that the Federal Reserve could tighten policy aggressively this year. Traders are now betting on five full rate hikes this year, assuming that the central bank raises rates by 0.25-percentage-point increments each time. The implied Fed policy rate at the end of the year has climbed to 1.4%, up from 1.3% on Thursday, according to futures-market data from Bloomberg.  Stocks and Treasury prices both dropped immediately after the jobs report showed that 467,000 jobs were created in January, a much stronger report than economists expected. The biggest bond-price declines—and yield increases—came in short-dated Treasuries. Yields remained higher across the curve in midmorning trading. The Dow Jones Industrial Average was still down 0.2%, while the S&P 500 and Nasdaq Composite were rebounding from early declines and steep Thursday losses.  Rising yields generally are bad news for tech stocks, so the Nasdaq's jump stands out. It was thanks, in part, to Amazon, which surged nearly 14% after the company reported quarterly earnings and said it planned to raise the price of its Prime membership by two dollars a month, the first such hike since 2018. Barron's Eric Savitz writes that sales in the core online store and third-party seller services sides came in below Wall Street's expectations. But... One major offset came from Amazon Web Services—the cloud unit had revenue of $17.8 billion, up 40% from a year ago, accelerating slightly from 39% growth in the December quarter, and ahead of the Wall Street consensus forecast at $17.4 billion. Meanwhile, Amazon also had a strong quarter in the advertising business, with revenue of $9.7 billion, up 32%, and ahead of the Street consensus forecast at $9.4 billion. Subscription services revenue were $8.1 billion, up 15%, but a little shy of consensus at $8.4 billion. After the close, The Wall Street Journal gave investors even more Amazon news. Citing people familiar with the matter, the Journal reported the e-commerce and cloud giant has been speaking to advisers about a potential Peloton Interactive acquisition. Amazon said it doesn’t comment on rumors or speculation. I don't suppose the new Prime price would cover a Peloton membership? Watch our weekly TV show on Fox Business Saturdays at 10 a.m. or 11:30 a.m. ET; or Sundays at 10 a.m. or 11:30 a.m. ET. This week, an interview with Laura Martin, senior analyst at Needham, on the outlook for Facebook, and an interview with Richard Bernstein, CEO of Richard Bernstein Advisors, on what to expect from the market.

 

DJIA: -0.06% to 35,089.74 S&P 500: +0.52% to 4,500.53 Nasdaq: +1.58% to 14,098.01 The Hot Stock: Amazon.com +13.5% The Biggest Loser: Clorox -14.5% Best Sector: Consumer Discretionary +2.8% Worst Sector: Materials -1.7%