Market Updates Archive
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Week Ending on Friday, February 3rd
Published February 6, 2023
Last week was another big week for the tech-heavy NASDAQ 100 Index as it moved higher by 3.92% while the S&P 500 Index rose about half as much and the Dow Jones 30 Index fell for the week. As the earnings season hits its mid-point, US and non-US markets are up smartly in 2023. Interest rates fell during the week, anticipating a 0.25% interest rate hike but the much better than expected nonfarm jobs number on Friday sent interest rates higher as some think that the economy remains strong and there is still some way to go in fighting inflation.
Below are the results for last week, February MTD, and 2023 YTD.
| Index | Daily Returns (January 30th – February 3rd) | Weekly Return |
February Return |
2023 Return |
||||
|---|---|---|---|---|---|---|---|---|
| Mon. | Tue. | Wed. | Thu. | Fri. | ||||
| S&P 500 | –1.26% | +1.47% | +1.06% | +1.46% | –1.06% | +1.64% | +1.44% | +7.82% |
| NASDAQ 100 | –2.02% | +1.50% | +2.14% | +3.59% | –1.78% | +3.35% | +3.92% | +14.98% |
| Dow Jones 30 | –0.75% | +1.12% | +0.01% | –0.13% | –0.19% | –0.19% | –0.54% | +2.40% |
| Developed Non-US | –0.64% | +0.58% | +0.89% | –0.14% | –0.93% | –0.25% | –0.18% | +8.81% |
| Emerging Markets | –2.01% | –0.22% | +1.23% | –0.60% | –1.78% | –3.36% | –1.16% | +7.86% |
Federal Reserve Meeting
As anticipated, the Federal Reserve raised its key short-term interest rate by 0.25%, bringing the target range to 4.50% – 4.75%, the highest since October 2007. This is the eighth increase since the Federal Reserve started hiking interest rates in March 2022. This interest rate for overnight borrowing is an important benchmark as many rates used for consumer lending are keyed off this interest rate.
In his remarks following the meeting, Chairman Powell stated that it was encouraging to see the monthly increases in inflation coming down but that there was still a lot of work ahead to bring inflation down to the 2% target. Most importantly, Powell used the word “disinflationary” several times in his remarks to describe the current economic process underway. While the stock markets fell initially once the rate increase was announced, his “disinflationary” remarks turned the markets around.
US Employment Data
The other big news this week was the blow-out employment numbers reported on Friday for January nonfarm payrolls. Expectations were for 187,000 new jobs and the actual number came in at 517,000, exceeding everyone’s expectations. The unemployment rate fell to 3.4% versus the estimate of 3.6%, which is the lowest level since May 1969. Leisure and hospitality added 128,000 jobs, which led all sectors. Other sectors with big job gains included professional/business services (+82,000) and government (+74,000).
Labor force participation edged higher to 62.4% while average hourly earnings increased 0.3% which met expectations. Such a strong showing by the job market put a dent in the stock market party as the Federal Reserve’s attempt to cool the job market does not appear to be working as expected yet. As some companies begin to lay off workers hired during the pandemic, the job market appears ready to absorb them.
Manufacturing & Services Data
The Institute for Supply Management (ISM) Services Index and the S&P Global US Manufacturing PMI Index for January both increased above expectations. For the indexes, below 50 indicates a sector contracting and above 50 expanding. The ISM Services Index rose to 55.2 (estimate of 50.4) from 49.2 in December. The Manufacturing PMI Index remained below 50 at 46.8 but increased from 44.7 in December. These unexpected jumps in the indexes support commentary by companies that business is trending in a positive direction with increases in order back log and a rebound in new orders.
Earnings Reports
The following are some key company earnings results.
Apple (AAPL) reported lower-than-expected Q4 profits and sales with year-over-year revenues declining for the first time since 2019. A major head wind for Apple is the effect of currency translation as Apple gets a significant portion of its business overseas. Despite the lackluster results, AAPL stock ended 5.89% higher for the week.
Alphabet (GOOGL) underperformed in most metrics with profits dropping significantly and year-over-year sales holding flat. Revenues from advertising—a core business for the company—decreased as competition in the digital ad market increased. A big contributor to the miss was YouTube advertising revenue which fell almost 8% versus a year ago.
Amazon (AMZN) exceeded estimates for Q4 sales despite certain business segments’ growing at slower rates compared to Q3 and consumer spending being impacted by inflationary pressures. Amazon Web Services reported 20% growth which was short of investor expectations. 2022 will be the slowest growth in sales since going public. Amazon cut 18,000 jobs in its corporate staff and has a hiring freeze currently.
ExxonMobil (XOM) delivered Q4 earnings of $12.8 billion resulting in industry leading full year profits of $55.7 billion. When oil hit $142 per barrel in 2008, profits equaled only $45.2 billion. Exxon did have $1.3 billion in additional taxes from the EU during the quarter. Capital expenditures for new oil and gas projects increased sharply in 2022, up 37%. Cash flow in 2022 surged to $76.8 billion versus $48.1 billion in 2021.
Meta (META) reported a 55% decrease in profit for Q4 and another quarterly decline in revenue (marking three quarters in a row). Despite this, sales were better than expected. The company reduced forecasted capital expenditures and increased plans for share repurchasing. META stock rose 24.99% for the week.
Something Completely Different
Did you know that a Missourian saved the French wine industry in the 1860’s? C V Riley, Missouri’s first entomologist, noticed that native grapevines were resistant to the pest phylloxera which was ravaging the French countryside and threatening to destroy the wine industry (Great French Wine Blight). Millions of native root stock were sent to France where French grape varieties were grafted to the Missouri rootstock and began a slow recovery. Many believe that phylloxera was first transited to Europe from America via steamship where native plants had no natural immunity. A statue celebrating the new world (America) saving the old world can be found in Montpelier, France.