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Stocks fell on Friday due to a strong jobs report, causing some investors to worry about the Federal Reserve continuing to raise interest rates.
The seemingly endless announcements of mass layoffs notwithstanding, Americans haven’t been this employed in more than fifty years. The Bureau of Labor Statistics said on Friday that the US added a whopping 517,000 jobs last month and the unemployment rate dropped slightly, to 3.4 per cent – the lowest it’s been since 1969.
Major central banks last week also raised interest rates to their highest levels since the global financial crisis, yet investors rushed into equities and bonds after officials hinted that the current cycle of monetary tightening may be nearing its end. Investors were buoyed after Fed chair Jay Powell said the “disinflationary process” in the US economy was under way.
The S&P 500 fell by 1.04 per cent, the Nasdaq Composite by 1.59 per cent, and the Dow Jones Industrial Average by 0.38 per cent. However, the S&P 500 still had a positive week, closing higher by 1.62 per cent, while the Nasdaq Composite gained 3.31 per cent for its fifth consecutive winning week.
Whilst the Nasdaq is up 15 per cent to start the year after plummeting 33 per cent in 2022 – some sobering news last week from the big three in Alphabet, Amazon and Apple — indicated slowing demand for everything from iPhones to digital ads to cloud services.
The process to become leaner in the wake of macroeconomic pressure contrasts starkly with the pandemic-era hiring boom, with headcounts increasing rapidly at tech companies that were responding to a rise in demand in digital products and services. Severance costs for tech companies is expected to be in the billions of dollars.
Only Apple remains the only large tech company that has not announced any job cuts or a cost-cutting programme, despite on Thursday reporting its first decline in quarterly revenues in three and a half years.
It appears that cost cutting has replaced growth on Wall Street’s checklist, and tech executives are being celebrated for efficiency over innovation.
Across the sectors earnings reports were the story of the week, with results landing from many of the world’s most valuable tech companies. Overall Q4 earnings metrics remain underwhelming with just a 69 per cent beat rate and 0.5 per cent aggregate positive surprise rate.
Of the 11 S&P 500 (SP500) sectors, eight ended the week higher. Communication services sector led gains, driven by Meta’s (META) encouraging results. Energy sector was the top loser as crude oil prices dropped.
Futures
The SPI futures are pointing to a 0.2 per cent gain.
Currency
One Australian dollar at 7:40 AM has weakened compared to the US dollar on Friday buying 69.05 US cents (Fri: 70.77 US cents).
Commodities
Iron ore futures are pointing to a 1.0 per cent gain.
Gold lost 2.8 per cent. Silver fell 5.1 per cent. Copper lost 0.8 per cent and oil dropped 3.3 per cent.
Figures around the globe
Across the Atlantic, European markets closed mixed. London’s FTSE added over 1 per cent, Frankfurt lost 0.2 per cent while Paris closed 0.9 per cent higher.
In Asian markets, Tokyo’s Nikkei added 0.4 per cent, Hong Kong’s Hang Seng lost 1.4 per cent while China’s Shanghai Composite closed 0.7 per cent lower.
On Friday, the Australian sharemarket closed 0.6 per cent higher at 7,558.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
