Futures on Wall Street’s key indexes were mixed heading into overnight trading Wednesday after stocks closed higher for the fourth day in a row on the heels of Big Tech earnings.
The winning streak in equities was overshadowed, however, by disappointing fourth-quarter results from Facebook parent company Meta (FB), which reported figures that fell short of expectations after the bell on Wednesday. In post-market trading, shares fell more than 20% as a result of the results. Contracts on the tech-heavy Nasdaq Composite fell 1.68 percent after the results, while the S&P 500 and Dow Jones Industrial Average futures were little changed.
Meta reported Q1 2022 revenue that fell short of analysts’ expectations of $30.25 billion, with the company estimating between $27 billion and $29 billion in the current quarter. In the short term, the company’s ability to navigate Apple’s (AAPL) recent privacy changes, which allow iOS users to opt-out of allowing their apps to track them across the web, was also a focus.
Facebook’s fourth-quarter earnings report comes at the end of a busy earnings season. Amazon (AMZN) will release figures after the market close on Thursday, making it the fifth and final corporate behemoth to reveal 2021 year-end performance figures, accounting for roughly one-quarter of the S&P 500’s total market capitalization. Alphabet (GOOGL) shares soared in Wednesday’s session after the tech behemoth surpassed quarterly sales and profit estimates and announced a 20-for-1 stock split.
Investors weighed Big Tech’s earnings against a startling job report released on Wednesday. According to ADP, private-sector employers in the United States cut 301,000 jobs in January, the first decrease since December 2020, as the Omicron variant slowed the labor market’s recovery.
“The takeaway for investors is that this is most likely a temporary blip on an otherwise strong recovery in employment markets,” SEI CIO Jim Smigiel told Editorials99 Finance Live. “It’s not surprising that we’re seeing some weakness.”
The ADP report served as a foreshadowing of the Labor Department’s official monthly jobs report, which is set to be released on Friday. Economists expect 150,000 non-farm payrolls to be returned in January, the slowest rate of hiring since December 2020 as the impact of the latest COVID waves catches up with economic data.
“It’s one of those things where we’re just going to have to get used to the short but shallow economic damage we saw as a result of the latest variant,” Art Hogan, chief market strategist at B Riley-National, told Editorials99 Finance Live.
Jared Bernstein, a member of the White House Council of Economic Advisers, told Editorials99 Finance Live that this month’s figures are likely to be “distorted” by a number of Americans who tested positive for the virus during the most recent surge in unpaid leave, which is not tracked on the payroll count.
In January, markets were roiled by concerns about central bank policies. The S&P 500 returned a negative 5.26 percent in January 2022, it’s a worst month since the benchmark dropped 12.5 percent in March 2020 after COVID-19 upended the global economy. Meanwhile, the Nasdaq Composite (IXIC) narrowly avoided having the worst January on record, falling 8.98 percent for the month.
As stocks begin to recover from their January slump, some strategists believe the worst of the Fed’s jitters may be behind us.
“In some ways, we may have reached peak hawkishness in terms of market expectations,” said Tony DeSpirito, CIO of BlackRock’s U.S. Fundamental Active Equity arm. “We certainly saw that in January and late last year — a shift in Fed tone, and now the market has reset expectations and is beginning to price them in.”
Terry Sawchuk, the founder of Sawchuk Wealth, told Editorials99 Finance that the Fed’s recent hawkishness has relieved political pressure to appear to be fighting inflation. “I think the Fed will back off of all of this at some point,” he predicted.