Stocks Rise on Strong Tech Earnings and Expectations of Interest Rate Cuts
Stocks experienced a significant boost on Friday, driven by impressive earnings from technology giants and the anticipation of interest rate cuts. Investors eagerly awaited the release of the US jobs report, which was expected to reveal further cooling in the labor market, reinforcing hopes for a reduction in borrowing costs.
Wall Street was poised to build on Thursday’s gains, with contracts for the S&P 500 up 0.5% and those for the tech-heavy Nasdaq 100 rising 1%. Meta Platforms Inc. saw a remarkable surge of 15% in extended trading, while Amazon.com Inc. rallied after surpassing profit expectations. However, Apple Inc. faced a setback as its earnings revealed weakness in China.
In Europe, the Stoxx 600 index received a boost from positive earnings news. Swedish appliance maker Electrolux AG jumped 6%, and Vallourec SACA surged 9% in Paris. The Asian market, on the other hand, witnessed mixed results, with key Chinese benchmarks recovering from steep declines marked by wild swings. A broader gauge of the region’s stocks climbed 0.7%.
Investors were particularly interested in the monthly US jobs report, which was set to be released later on Friday. Analysts anticipated evidence of further cooling in the labor market, which could potentially encourage the Federal Reserve to implement interest rate cuts. It was predicted that employers would have added workers at a slower pace in January, while Bloomberg economists projected a slight increase in the unemployment rate from 3.7% to 3.8%.
Treasuries remained steady following Thursday’s advance that caused the 10-year yield to drop by three basis points. The dollar also experienced a slight decline.
China experienced a volatile session on Friday, with the Shanghai Composite gauge tumbling almost 4% due to declines in healthcare and tech stocks. Some market observers attributed these losses to selling ahead of the Lunar New Year holiday. However, the gauge later recovered and pared the decline to 1.5%. Kieran Calder, head of Asia equity research at Union Bancaire Privee, emphasized the need for China to address its property crisis in order to regain investor confidence.
In Japan, Aozora Bank Ltd. faced a significant decline of 16%, resulting in a weekly drop of over 30%. The bank announced that it would report its first loss in 15 years due to bad loans associated with US property.
US investors closely monitored developments in regional banks, as an index of US regional financials was on track for its worst week since May of the previous year, during the banking crisis fallout. New York Community Bancorp shares closed at their lowest point since 2000 on Thursday, sinking 11% and adding to the previous day’s record 38% plunge. The bank shocked investors by reducing its dividend, reporting a quarterly loss, and increasing loan-loss provisions.
In other markets, oil halted its two-day drop, while gold remained relatively stable. Bloomberg News reported that negotiations were progressing towards a deal to pause the Israel-Hamas war and secure the release of civilian hostages.
Overall, stocks experienced a significant rise driven by strong tech earnings and expectations of interest rate cuts. Investors eagerly awaited the US jobs report for further insights into the labor market, while keeping a close eye on developments in regional banks.