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What we're watching | 💼 The January jobs report: Last month's jobs report is set for release at 8:30 a.m. and is expected to show 185,000 new nonfarm payrolls. January's unemployment is expected to tick up to 3.8% after surprising economists in December by staying at 3.7%. A strong January with rates this high — as inflation cools — is a key requirement for a soft landing.
⛽️ Energy's rough Q4: ExxonMobile and Chevron lead off quarterly reporting for Big Oil on Friday and it likely won't be pretty. Analysts expect energy to show the sharpest earnings decline of all S&P 500 sectors, down 31.4% against the benchmark's rise of 1.5%.
🙂 Consumer sentiment check: Investors will get a reading from the University of Michigan's Consumer Sentiment Index, which is expected to confirm the survey's preliminary January reading of 78.8, up from December's 69.7. The surge would match a rosier-than-expected read from the Conference Board this week, which showed consumer confidence rose in January for the third straight month.
⏰ Digesting a week with (maybe) too much data: This past week absolutely buried investors, economists, and strategists in data. There were earnings results from Microsoft, Alphabet, Amazon, Meta, and Apple, not to mention other sector-leading corporate giants. The Fed announced its latest decision to keep rates steady and talked down future cuts. And the January jobs report will top it off. Stocks were set to finish the week higher, but it might take another moment for all the action to fully sink in. |
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Note: Data is as of the time of opening this email. To view real-time markets data click here. |
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| Tech investors' insatiable appetite | Today's Takeaway is by Hamza Shaban, Senior Reporter.
The years of cost efficiency being enough are over and investors showered by gains from Big Tech are looking for more.
Primed by towering expectations of an AI-fueled transformation and narratives of relentless growth, the market is applying the same cutthroat logic of more with less.
But instead of executives touting their efficiency to eke through tough quarters, it’s shareholders applying the pressure for perfection.
Alphabet (GOOG, GOOGL) and Microsoft (MSFT) were on the receiving end of the squeeze this week. The pair surpassed analyst expectations but investors fixated on the perceived weak points, collectively pining for outstanding results to justify holding expensive stocks.
But the areas that appeared softer — ad revenue and cloud growth — only seemed squishy when investors applied a harsh rubric to the trillion-dollar giants. It's not enough for results to flirt with forecasted figures, or beat them. Only a smashing success can fully satiate Big Tech shareholders.
Meta (META) and Amazon (AMZN) delivered the goods on Thursday, offering strong outlooks for the months ahead, and in CEO Mark Zuckerberg's case, introducing a sweetener: a new dividend. Investors rejoiced.
The forking paths of Big Tech's siblings this week highlight the unforgiving judgment of investors accustomed to abundance. Doing merely great isn't going to cut it.
As analyst Dan Ives said, following what he saw as a successful Microsoft report, the quarter "should be printed out and hung in the Louvre."
But investors figuratively opted to skip the exhibit, highlighting the mismatch between inflated desire and what booming enterprises can deliver.
Investors expressed other financial qualms among otherwise thriving businesses. The grand pitch that executives are selling about AI’s transformative power apparently also comes with some fine print in the form of heavy up-front investments.
Alphabet reported capital expenditures that ballooned 45% for the quarter, exceeding $11 billion. Microsoft too recorded a 55% increase in capex. The boosted spending in Alphabet’s case was tied mostly to servers and data centers, the company said, as it prepares for the long-term growth potential of global AI applications.
And there’s more where that came from. CFO Ruth Porat said that investment in capex will be noticeably larger in 2024. The tech, just like popular excitement, can be a challenge to prop up.
Even purchasing the fuel to drive the dream of AI dominance can count against you. |
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| Watch on Yahoo Finance Live | - Dana Peterson, the Conference Board chief economist, and Jennifer Lee, BMO Capital Markets senior economist, on the jobs report at 8:30 a.m.
- Neal Dingmann, Truist Securities managing director, energy, on energy results at 9:45 a.m.
- Kevin Hochman, Brinker CEO, on Chili's and Brinker earnings at 10:10 a.m.
- Chris Miller, "Chip War: The Fight for the World's Most Critical Technology" author, on a crowded chips market at 11:15 a.m.
- Steven Davis, Stanford Institute for Economic Policy Research senior fellow, on the upside of remote work at 11:30 a.m.
- Our latest episode of Good Buy or Goodbye featuring John Baumgartner, Mizuho managing director, equity research, on Beyond Meat at 3:30 p.m.
- Gil Luria, D.A. Davidson managing director, recapping Big Tech earnings at 3:30 p.m.
All times ET. |
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Chart of the day | Today's Chart of the Day features an entry from our latest Chartbook.
EY chief economist Gregory Daco wrote on X he believes the labor market is softening but it won't appear in Friday's headline payroll additions number. Instead, Daco will be watching for a lack of breadth in job gains.
"As in prior months, softening is visible in the reduced diffusion of job growth across sectors, the reduced hours worked & easing aggregate payrolls index," Daco wrote.
This trend was recently flagged by JPMorgan chief US economist Michael Feroli in the Yahoo Finance Chartbook as a reason job growth could slow in 2024:
"Over the past year one thing that has continued to impress has been the pace of job growth. But increasingly that has been dominated by two sectors: government and health & social assistance, accounting for 76% of job growth in Q3 and 83% in Q4. When one considers that over 50% of health care payers are governmental agencies maybe we should really consider these two sectors as one. I think this says two things. First, maybe the rate hikes did work. The part of the economy that is not government or government-affiliated has eked out only modest job gains recently. Second, as these two sectors get staffing back on-sides we can expect they will deliver fewer job gains, and overall employment growth should continue to slow."
— Josh Schafer |
|  | For more graphics like this, follow Yahoo Finance on Instagram. |
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Earnings and economic calendar | Friday
- Economic calendar: Nonfarm payrolls, January (+175,000 expected, +216,000 prior); unemployment rate, January (3.8% expected, 3.7% previously); average hourly earnings, month-over-month, January (+0.3% expected, +0.4% prior); average hourly earnings, year-over-year, January (+4.1% expected, +4.1% prior); average weekly hours worked, January (34.4 expected, 34.3 prior); labor force participation rate, January (62.5% previously); U. of Michigan sentiment, January final (78.8 expected, 78.8 prior); factory orders, December (+0.5% expected, 2.6% prior); Durable goods orders, December final (0.0% prior)
- Earnings: Chevron (CVX), Exxon Mobil (XOM), Charter Communications (CHTR)
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