U.S. stocks powered higher this week, sending the major indexes to fresh record highs. The catalysts were a barrage of strong quarterly earnings reports from mega-cap technology companies as well as robust economic data that eased concerns about a potential recession.
Big Tech Earnings Impress
The week’s biggest fireworks came from Meta Platforms, the parent company of Facebook, which saw its stock price rocket up over 20% in a single day after beating Wall Street’s estimates for earnings and revenue.
Other major technology companies like Apple, Amazon, and Alphabet also reported better-than-expected results, helping to lift the broader market. The table below summarizes some of the key metrics from these reports:
|Stock Price Change
(Source: Company reports)
This surge in big tech stocks helped push the tech-heavy Nasdaq composite to a 2.7% weekly gain, its best weekly performance since November. The S&P 500 rose 1.6% on the week, also closing at a record high.
January Jobs Report Crushes Expectations
On top of the strong earnings, the January U.S. jobs report also smashed economists’ forecasts, showing 517,000 jobs added versus expectations for 187,000. The unemployment rate also fell to 3.4%, its lowest level since 1969.
This data seemed to ease fears about an imminent recession, overshadowing concerns around still elevated inflation and more potential interest rate hikes from the Fed. Stocks rallied sharply on Friday following the jobs numbers, capping off the banner week.
Outlook Still Uncertain Despite Gains
While this past week’s market action was overwhelmingly positive, the economic outlook remains murky according to analysts. Inflation continues to show signs of moderating but is still well above the Fed’s 2% target. Global growth also faces headwinds from China’s reopening and the war in Ukraine.
Most experts expect further interest rate increases and eventual cuts to still-strong corporate earnings growth, tempering optimism about stocks’ recent run. Volatility is almost assured going forward. As Oanda senior market analyst Edward Moya stated:
Wall Street bulls remain undeterred even as Treasury yields surge and the dollar rebounds. Monetary policy will remain restrictive for some time and that should eventually trigger an ugly slide for equities. It seems traders are growing confident that rates will peak soon and that earnings strength will persist.
The next major catalysts for stocks appear to be the January consumer price index reading on February 15th and more commentary from Federal Reserve officials about their policy plans. For now, investors seem intent on riding the momentum higher, but that exuberance could quickly shift if the incoming data disappoints.
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