The stock market rallied on Friday, recovering some of the losses from earlier in the week, as a strong January jobs report and blowout earnings from big tech companies like Meta Platforms lifted indexes.
Dow and S&P 500 Hit Record Highs to End the Week
The Dow Jones Industrial Average rose 137 points, or 0.4%, to finish at 34,721 and notch its third straight record close. The S&P 500 climbed 24 points, or 0.5%, ending at 4,431, also a record. The tech-heavy Nasdaq Composite jumped 183 points, or 1.3%, to 14,098.
For the week, the Dow rose 1.1%, the S&P 500 gained 1.5%, and the Nasdaq jumped 4.3%. January’s job growth of 517,000 positions topped economist estimates and marked an acceleration from December, a sign of the economy’s resilience despite high inflation and rising interest rates.
“The January employment report came in way better than expected, underscoring continued strength in the U.S. economy,” said Ryan Detrick, chief market strategist at Carson Group.
Meta Stock Skyrockets on Earnings Beat
Shares of Meta Platforms rocketed over 20% in after-hours trading, adding over $80 billion to the company’s market valuation, after the social media giant reported fourth-quarter results that exceeded Wall Street projections.
Meta posted earnings per share of $3.00 on revenue of $32.17 billion versus expectations of $2.26 per share on revenue of $31.53 billion. The company also announced a new $40 billion share buyback program.
Monthly active Facebook users were reported at 2 billion globally, matching estimates, while daily active users rose 5% year-over-year to 2 billion. Meta’s results provided a spark after shares plunged 71% over the past year on slowing growth, privacy changes from Apple, and competition from TikTok.
“Investor sentiment surrounding Meta’s stock has been very negative after significant decreases in users and profitability in 2022. This report indicates Meta may be turning a corner with stabilizing user growth and expense discipline,” said Brian Kern, Senior Tech Analyst at Cowen.
Strong Labor Market Defies Slowdown Fears
Expectations were for job growth to slow to 185,000 in January as the Federal Reserve raises interest rates to cool inflation. Instead payrolls swelled by over half a million despite technology industry layoffs from companies like Amazon, Meta, and Google parent Alphabet.
The unemployment rate fell to 3.4%, matching a 53-year low. Average hourly earnings rose 0.3% after jumping 0.4% in December. The strength of the labor market could give the Fed room to stick to its hawkish stance.
“The strength of this jobs report blows the ‘Fed pivot’ narrative out of the water,” said Seema Shah, chief global strategist at Principal Asset Management. “The Fed will need to continue hiking beyond 5%.”
Nasdaq Leads Market Higher
The technology sector powered markets higher after stellar earnings from Apple, Amazon, Google parent Alphabet, and Meta Platforms. Apple stock jumped over 5% to an all-time high after reporting record sales and earnings fueled by iPhone demand. The company also announced a 5% dividend increase.
Alphabet shares gained 7.5% after topping profit expectations. Amazon stock surged 12% as robust growth in its cloud business AWS offset a light holiday quarter. The four tech titans together accounted for over $275 billion in market value gains.
Chipmaker Qualcomm rose 12% on an earnings beat and Nvidia jumped 14% despite missing estimates as data center growth helped results. Software names like Adobe and Salesforce also traded sharply higher.
| Company | Gain |
|---|---|
| Meta Platforms | +21% |
| Amazon | +12% |
| Apple | +5% |
| Alphabet | +7.5% |
| Nvidia | +14% |
Oil Prices Decline but Still Up in 2023
Oil prices fell 3% on Friday but posted a third straight weekly gain amid signs of demand recovery in China after dropping COVID restrictions. Prices also drew support from a European Union ban on Russian oil products.
“The oil market is still riding high on hopes for a surge in China’s demand now that Covid restrictions have been scrapped,” said PVM analyst Stephen Brennock.
Brent crude settled down at $82.17 a barrel, trimming its 2023 advance to 6%. Oil has rebounded over the past month since bottoming below $80 in December. Analysts see further upside if fuel demand accelerates.
“We could easily see Brent back above $100 later this year if China oil demand rebounds strongly,” said BNP Paribas analyst Harry Tchilinguirian.
Global Stocks Higher
European shares moved broadly higher on Friday, with the pan-European STOXX 600 index rising 0.9% to notch its third straight weekly advance. Miners led sector gains along with technology and energy stocks.
In Asia, Japan’s Nikkei rallied 2.3% while China’s Shanghai Composite added 0.7%. Markets in Hong Kong were closed for a holiday.
Outlook for Next Week
- Focus remains on central bank rate moves and outlook for inflation
- Another heavy week of earnings with reports from Disney, Pepsi, Toyota, Twitter, Uber and more
- Key economic data includes PMIs, consumer inflation, small business optimism, job openings and consumer sentiment
Markets digested a policy pivot from the Federal Reserve this past week. While the Fed raised interest rates by 25 basis points as expected, Chair Jerome Powell said more hikes were in store and dismissed notions of cuts in 2023.
The January jobs report affirmed the strength of the economy and labor market. With inflation still running hot, the data supports the case for higher rates to tame price pressures. Fed speakers in the coming week could reinforce hawkish signals.
On the earnings front, Walt Disney headlines a busy slate of reports that will provide more clues on consumer demand. Disney’s streaming growth and theme park business will draw investor scrutiny.
Friday’s University of Michigan consumer sentiment survey will offer insight on how resilient household balance sheets are amid still elevated inflation. Any deterioration in confidence could raise recessionary fears.
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