Medicare Agent News: Tech Sees Its Shadow

Wednesday, February 2, 2022

Tech Sees Its Shadow

By Jeffrey Cane | Wednesday, February 2

Groundhog Day. Today first seemed to resemble Groundhog Day, the movie, with stocks advancing -- again with a notable ascent after lunch –in a repeat of the three previous sessions. The trading was helped in large part by tech earnings. Same story, different day. After the market closed, however, it looked more like Punxsutawney Phil predicting six more weeks of winter.

Indeed, a bone-tingling chill has been felt in the market. In after-hours trading this evening, shares of Facebook parent Meta Platforms and Spotify Technology were tumbling after surprisingly weak outlooks from both companies. Meta's results and guidance in particular looked certain to drag down the tech sector tomorrow. More on that below.

As we near the halfway point of the quarterly earnings season, it's a reminder that earnings giveth, and earnings taketh away. We are just two days away from the weakest month for stocks since the start of the pandemic. Plenty of concerns remain over higher interest rates, persistent inflation, and the path of the pandemic, not to mention the nervousness over the situation in Eastern Europe. Company surprises will only add to a potentially volatile mix.

Today, the S&P 500 closed up 0.9% for its biggest four-session gain since November 2020. All but one (consumer discretionary) of its 11 sectors gained. The Dow Jones Industrial Average ended up 0.6%, the Nasdaq Composite, up 0.5%. The three market measures last had a four-day winning streak in late December.

The Russell 2000, however, broke its own winning streak of three sessions, ending down 1%.

Before this evening's letdown, Big Tech had wowed again with Alphabet's quarterly results after the market close yesterday. The parent of Google also announced a 20-for-1 stock split. Alphabet's shares surged 7.5%, while its class C shares (ticker: GOOG) climbed 7.4%.

Advanced Micro Devices also had a blow-out quarter and provided a forecast that was much stronger than expected. Its shares rose 5.1%. Other semiconductor companies gained too. Xilinx, whose acquisition by AMD is expected to close soon, rose 4.9%, and Micron Technology advanced 3.8%.

Match Group, home to dating sites like OKCupid and Tinder, just missed expectations for its revenue growth yesterday. Executives pointed to the effect the Omicron surge had on "dating sentiment" and mobility, and its shares rose 5.3% today. "We're hopeful that once we get past the effects of Omicron, we could even have that summer of love that we had expected back in 2021, after the vaccines were introduced," Gary Swidler, Match's chief operating officer and chief financial officer, said on the earnings call today.

Some stocks could not find any love. PayPal Holdings tumbled 24.6% after reporting fourth-quarter results. What unnerved investors, was the company's forecast that it would add just 15 million to 20 million new new active accounts this year, a sharp deceleration from last year's growth of 48.9 million. Barron's Callum Keown has more here.

Logistics provider C.H. Robinson reported fourth-quarter adjusted earnings per share that came up short of estimates. Its operating expenses increased 33.9% in the quarter, "primarily driven by increased salaries, incentive compensation and technology expenses," the company said. Its shares sank 11.5%.

Crude oil futures rose slightly, to $88.26 a barrel, after OPEC and its allies said they would stick to plans to increase production by 400,000 barrels of oil in March. My colleague Avi Salzman wrote that it was "a sign that the powerful oil-producing bloc has not been spooked by high prices or fears of losing market share." The Energy Select Sector SPDR exchange-traded fund ended up 0.3%.

Treasury yields slipped after a report from ADP showed a loss of 301,000 jobs in the nonfarm private sector in January. Wall Street had been expecting a gain. The yield on the two-year note settled at 1.154%, while the yield on the 10-year ended at 1.765%.

The ADP report is not always a reliable indicator of the government's monthly jobs report, but it may highlight how grim, or maybe just how unpredictable, the January report, which comes out on Friday, could be.

The trouble, of course, is that the payrolls report will reflect the worst of the Omicron surge, notes Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. He wrote:

the payroll figures are based on how many people are working during a "survey reference week," which is the calendar week that includes the 12th of the month, and this year that was the week of Jan. 9-15. According to the CDC, the highest seven-day average case Covid case count occurred on Jan. 15, so the survey week came right at the peak of the Omicron effect in the United States.

A lack of clarity about the economy and a surprisingly weak outlook from a tech giant will weigh on investors' minds. It could be a long winter.