Stocks ended Friday on a high note as strong earnings reports from likes of Microsoft and Apple helped technology stocks rebound from the beating they had suffered so far this year. The S&P 500 added 2.4% on Friday for its best session since June 2020, the Dow Jones climbed up 1.34%, and the Nasdaq Composite surged 3.3% but still remains on track for its worst month since the 2008 financial crisis. This week's crazy volatility and big swings indicate the challenge the market now faces, which is that financial conditions are going to be tightening, and Wall Street is now expecting that Federal Reserve will raise rates five times this year. For the week, the S&P and Dow rose roughly 1% while the Nasdaq ended flat, offering no hint of the volatility that happened along the way.
Top news last week:
- Big Tech Earnings lift up the market: Last week few of the largest S&P 500 companies reported their earnings and helped the market reverse their downfall. Microsoft reported beats on both earnings and revenue, with quarterly sales that topped $50B for the first time on strength in cloud, gaming and Windows software. They also delivered an upbeat forecast for fiscal third quarter and MSFT stock is up 5.56% on the week. Apple, the world's most valuable company posted the highest revenue in its history. Apple's (AAPL) sales during the holiday quarter climbed 11% to $123.9B, led by strength in the iPhone, which generated $71.6B of revenue over the three-month period. Earnings also topped $30B for the first time. AAPL stock rose 6.40% during the week. One exception was Tesla (TSLA) that also managed to smash the earnings, however the stock price still drifted lower on supply chain developments that got some investors nervous. Its factories have been running below capacity for several quarters due to low quantities of semiconductors and related parts, and that headwind is expected to persist throughout 2022. "The chip shortage, while better than last year, is still an issue," CEO Elon Musk said on a conference call with analysts.
- Meta's Diem Project Is Reportedly Shutting Down: Meta Platform, Inc.'s (FB) Diem stablecoin project may be shuttering. According to a Bloomberg report. Facebook founded the Libra project, now known as the Diem Association, back in 2019. The initial idea of the project was to have money spent, transferred and paid across its platform just "as easily as sending a text message" and could even bring financial services to many of the world's underbanked citizens. The initiative immediately struggled to get off the ground. As regulatory scrutiny picked up across the globe, many founding members pulled out of the endeavor including PayPal (PYPL), eBay (EBAY), Stripe, Visa (V) and Mastercard (MA). Policymakers cited existing privacy concerns about how Facebook handles user information, and they saw the potential for the new scheme to enable crime, money laundering and erode their control over the monetary system. Meta currently owns about a third of the Diem venture, with the rest retained by venture capital firms and tech players that are members of the association. While discussions are still in the early stages, Bloomberg reports that Diem's intellectual property might be sold to in order to return capital to its investor members.
- Airlines Optimistic About 2022: Southwest Airlines, JetBlue, and Alaska Air Group all offered optimistic outlooks for the travel sector in 2022. Southwest Airlines reported adjusted net income of 14 cents a share in the fourth quarter—its first quarterly profit since the pandemic began. Bob Jordan, who takes over as CEO on Tuesday, said, “the worst appears to be behind us”. JetBlue reported a narrower-than-expected net loss and operating revenue that beat expectations. It says first-quarter revenue will fall between 11% to 16% from the same quarter in 2019 because Omicron hit demand. CEO Robin Hayes expects a “very strong summer peak.” Alaska Air said it marked one of the industry’s most profitable performances in its fourth quarter despite Omicron disruptions and severe winter storms in December. Alaska Air expects to “return to 100%” of its pre-Covid-19 flying by the summer, CEO Ben Minicucci said.
Top S&P 500 sectors last week:
Energy sector + 5.02% (ETF: XLE)
Information technology sector + 2.26% (ETF: XLC)
Financial sector + 1.32% (ETF: XLP)
Calendar:
Next week's economic-data highlight next week will be Jobs Friday. Labor Department data is expected to show a gain of 150,000 nonfarm payrolls in January, after an increase of 199,000 in December.
Economists will also be tuning in to the European Central Bank's next monetary-policy decision on Thursday. The ECB is unlikely to budge its target interest rate this year.
Earnings:
Monday, January 31: NXP Semiconductors (NXPI), Cirrus Logic (CRUS) and Harmonic (HLIT).
Tuesday, February 1: Exxon Mobil (XOM), UBS (UBS), UPS (UPS), Sirius XM (SIRI), Alphabet (GOOG), General Motors (GM), Starbucks (SBUX), AMD (AMD), PayPal Holdings (PYPL), Match Group (MTCH) and Electronic Arts (EA).
Wednesday, February 2: AmerisourceBergen (ABC), Humana (HUM), AbbVie (ABBV), Meta Platforms (FB) T-Mobile US (TMUS), Spotify (SPOT) and Qualcomm (QCOM)
Thursday, February 3: Shell plc (RDS.A), Cardinal Health (CAH), Cigna (CI), Honeywell (HON), Penn National Gaming (PENN), Amazon (AMZN), Ford Motor (F), Pinterest (PINS), Wynn Resorts (WYNN), Fortinet (FTNT), News Corp. (NWSA), Unity Software (U) and Activision Blizzard (ATVI).
Friday, February 4: Bristol-Myers (BMY), Eaton (ETN) and CBOE Global Markets (BATS:CBOE).
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