Friday saw a rise in stocks as investors assessed a slowdown in employment growth, which may heighten expectations that the Federal Reserve will soon end its rate-hiking campaign.
The S&P 500 (\GSPC) increased by about 1%, while the Dow Jones Industrial Average (\DJI) gained almost 0.7%, or more than 200 points. Roughly 1.4% was gained by the tech-heavy Nasdaq Composite (^IXIC). For all indices combined, it was the best weekly performance of 2023.
As a result of car sector strikes, the US economy added 150,000 jobs in October, less than the 180,000 number that was predicted, according to the Bureau of Labour Statistics. The rate of unemployment increased slightly to 3.9%.
The state of the labour market is a crucial factor in the decisions made by the Fed, and the indications of a weakening economy should bolster the argument against another rate increase this year.
Tech stocks recovered some of their early losses following Apple’s (AAPL) poor earnings. Even though the iPhone manufacturer’s quarterly report topped forecasts, it remained cautious about its growth prospects, predicting that sales of iPads and wearables would “decelerate significantly.”
Investors are considering the implications for consumer resilience as well as if the Fed’s view of the economy’s dampening effect stems from this season’s string of poor results.
Many investors, who think that the Federal Reserve would abandon its tightening campaign in response to rising unemployment rates, applaud the most recent jobs report’s indication of a downturn in the labour market.
While the Dow Jones Industrial Average (^DJI) rose 0.7%, or more than 200 points, the S&P 500 (\GSPC) climbed over 1%.Roughly 1.4% increased on the tech-heavy Nasdaq Composite (^IXIC).
Among the big names releasing their results the next week are Uber (UBER) and Lyft (LYFT). This comes only a few days after the two ride-sharing businesses decided to settle a $328 million lawsuit involving freelance employment by paying New York drivers. After coming public in September, Instacart (CART) is also expected to report, providing investors with another perspective on the gig economy. Additionally scheduled to report earnings are eBay (EBAY), Disney (DIS), and Robinhood (HOOD).
As Americans prepare for the holiday shopping season and interest rates continue to rise, investors will be given a closer look at the most recent consumer credit reading. As jobless numbers marginally worsen, a recent study on consumer sentiment will also provide insight into how consumers are feeling.
Even though a federal jury in Manhattan convicted FTX co-founder Sam Bankman-Fried guilty of deceiving his lenders, investors, and customers, the 31-year-old businessman may still be facing more legal issues in the next year.
In a second criminal trial set to start in March, Bankman-Fried—who oversaw the biggest cryptocurrency crash in history—will be charged with bank fraud and bribing Chinese officials.
And at the end of that same month, he will be sentenced for the criminal charges he was recently found guilty on. The maximum punishment for the counts against him is 110 years.
“We accept the verdict of the jury. However, we are quite dissatisfied with the outcome,” Mark Cohen, Bankman-defense Fried’s attorney, stated.
Following the bell on Thursday, Apple boasted about its record-breaking iPhone sales in September, which rose to $43.8 billion in the company’s fourth quarter, somewhat above analysts’ projections. For the first time, services revenue—a growingly significant component of the venerable hardware company—surpassed $22 billion.
However, investors chose to concentrate on the negatives, which caused the stock to fall 1% on Friday afternoon. Apple CFO Luca Maestri stated the firm expects sales from the iPad and Wearables categories to “decelerate significantly” from the fourth quarter during a call with analysts on Thursday night. According to him, overall business income would likewise be comparable to the previous year.
According to Angelo Zino, senior stock analyst at CFRA Research, “we believe the biggest negative from the results was the 2% Y/Y decline in China, worse than we expected,” in a note following the earnings. Nonetheless, Zino maintained his Buy rating for the business and set a 12-month price target of $220 for the shares, which would be a 25% rise over the current price.
Although UBS’s David Vogt stated in a note published on Friday that “we expect Huawei to ramp production of high-end smartphones over the next 12 months,” China remains a concern for the iPhone in the 2024 fiscal year.
On Friday, investors reacted favourably to fresh jobs data that indicated slower growth, which is an indication that the Federal Reserve is closely monitoring and which might signal a halt in further rate rises. As a result, stocks rose and the yield on 10-year government bonds decreased.
During a news conference on Wednesday, Fed Chair Powell admitted that a slowdown in the labour market will probably be necessary for inflation to keep falling. According to figures from the Bureau of Labour Statistics, nonfarm payroll growth reached 150,000 in October, while the unemployment rate increased to 3.9% from 3.8%. Right present, the jobless rate is at its highest point since January 2022.
Friday’s S&P 500 increased by about 1% as the afternoon trading session got underway.
The Bureau of Labour Statistics issued statistics on Friday morning that showed a 35,000 fall in manufacturing employment in October. This decline was mostly attributed to the loss of 33,000 jobs in motor vehicles and components. The impact of the auto strike was initially evident in the monthly jobs report at this time.
Along with competitors Ford (F) and Stellantis (STLA), General Motors (GM) and the United Auto Workers (UAW) union struck a provisional deal earlier this week.
The tentative agreement will be put to a vote by the UAW’s GM national committee on Friday. Once verified, the agreement essentially puts an end to the brutal labour conflict that has completely paralysed the car sector.
The Tempe, Arizona-based business reported adjusted earnings per share of $3.60 as opposed to projected losses of 78 cents. The $2.77 billion in revenue was as anticipated. The overall gross profit per unit, or GPU, for the used automobile reseller increased by 70% to $5,952 in the previous year.
Citing fewer unit sales compared to last year, DA Davison analysts reduced their price objective for the company from $60 to $35 while keeping a neutral recommendation on it. 80,987 units were sold during the quarter, a 6% increase from the previous quarter but a 21% decrease from the year before.
The business anticipates a drop in sales of retail units, mostly due to seasonal and industry trends. Carvana has been putting a lot of effort into turning a profit, even at the short term cost of expansion.