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It is another day with another mega-cap stock indicated to open lower and another day where the broader market looks unfazed by it. The mega-cap laggard today is Amazon.com (AMZN), which is indicated 2.5% lower after its earnings report, disappointing Q1 revenue guidance, and plan to spend approximately $100 billion on capex in 2025.
Still, the company's overall report has a lot of defenders, so it wouldn't be a surprise to see the stock have a better showing in the regular session. In any case, Amazon's weakness is but a headwind now in front of the open as opposed to a hurricane-type event. A generally mixed response to earnings reports since yesterday's close can be viewed in the same light. For example, Doximity (DOCS) is up 23% and BILL Holdings (BILL) is down 33% after their earnings reports.
There was another headwind for the market this morning and it was the January Employment Situation Report. To that end, there wasn't a lot of conviction in the equity futures trade leading up to that 8:30 a.m. ET release, and we can't say there is a lot of conviction after it either.
Currently, the S&P 500 futures are down two points and are trading roughly in-line with fair value, the Nasdaq 100 futures are down 12 points and are trading fractionally below fair value, and the Dow Jones Industrial Average futures are up 12 points and are trading roughly in-line with fair value.
The January employment report, overall, was good when accounting for upward revisions to the prior two months, which added 100,000 to the change in nonfarm payrolls, the dip in the unemployment rate to 4.0% (from 4.1%), and the solid 0.5% increase in average hourly earnings. Also, benchmark revisions showed the total nonfarm payroll level for March 2024 was revised downward by 589,000 as opposed to 818,000 with the preliminary estimate seen in August.
The key takeaway from the report is that it is a good "economic" report as the jump in average hourly earnings on a nominal and real basis is a good portent for consumer spending.
The question will be if it is a good "market" report given that the jump in average hourly earnings can be construed as a sticky inflation indicator that will forestall another rate cut by the Fed.
The 2-yr note yield, at 4.24% just before the release, is at 4.26% now, up five basis points from yesterday's settlement. The 10-yr note yield, at 4.44% just before the release, is at 4.49% now, up five basis points. The U.S. Dollar Index is up 0.2% to 107.88.
Notable headlines from the January Employment Situation Report:
- January nonfarm payrolls increased by 143,000 (Briefing.com consensus 155,000). The 3-month average for total nonfarm payrolls increased to 237,000 from 204,000. December nonfarm payrolls revised to 307,000 from 256,000. November nonfarm payrolls revised to 261,000 from 212,000.
- January private sector payrolls increased by 111,000 (Briefing.com consensus 163,000). December private sector payrolls revised to 273,000 from 223,000. November private sector payrolls revised to 244,000 from 182,000.
- January unemployment rate was 4.0% (Briefing.com consensus 4.1%), versus 4.1% in December. Persons unemployed for 27 weeks or more accounted for 21.1% of the unemployed versus 22.4% in December. The U6 unemployment rate, which accounts for unemployed and underemployed workers, held steady at 7.5%.
- January average hourly earnings were up 0.5% (Briefing.com consensus 0.3%) versus 0.3% in December. Over the last 12 months, average hourly earnings have risen 4.1%, versus an upwardly revised 4.1% (from 3.9%) for the 12 months ending in December.
- The average workweek in January was 34.1 hours (Briefing.com consensus 34.3), versus a revised 34.2 hours (from 34.3) in December. Manufacturing workweek was little changed at 40.0 hours. Factory overtime was unchanged at 2.8 hours.
- The labor force participation rate increased to 62.6% from 62.5%.
- The employment-population ratio increased to 60.1% from 60.0%.
