Market 02/02: Amazon, Facebook boost market strongly after ER

Jobs report: New NFP figure and hourly wage growth both double forecasts.

BLS Nonfarm Payrolls (NFP) report double expectations: shows labor market remains tight

NFP figure increased to +353,000 in January, double expectations: 187,000.

Unemployment rate: remains at 3.7%.

Labor force participation rate reaches 62.5% - trending down

Labor force participation rate for ages 25-54 (prime-age) rises to 83.3% in January.

Permanent job losses rise slightly again although temporary layoffs decrease.

Wage growth (m/m) also double estimates.

Wages rise fastest since March 2022, with average hourly earnings up 0.6% MoM, double the 0.3% estimate, up 4.5% YoY.

… however in reality, this average wage increase comes from hours worked at lowest since March 2020 (34.1), instead of earnings increasing → Sign of weakening demand.

January job growth mainly from sectors health care, professional services, as well as retail.

Layoffs in financial sector surge to over 23,000, highest since September 2018.

As Viet Hustler previously noted, wage growth accounts for 80% of the reason inflation remains high! (Related article)

NFP survey (Establishment survey) and Household Survey continue to contradict each other.

Once again, the large gap between the NFP survey and the Household survey makes the NFP report difficult to accurately reflect the labor market.
- In contrast to the increase of 353,000, the Household survey reports employment decreased by -31,000 (continuing the huge drop of -1.5 million jobs in December).
Read more about the difference between the NFP payroll survey and the household survey: here.

The reason continues to stem from the full-time and part-time employment issue.
- Full-time jobs decreased for 2 consecutive months, while part-time jobs continue to increase (though significantly lower than the previous month)
  => causing the number of payrolls to increase due to one person holding multiple jobs.

=> Today's employment report continues to tell the same old story as the December employment report:

Viet Hustler's analysis of labor market issues.

Today's NFP labor report dashes market hopes for Fed rate cuts starting in March

Rate cut expectations continue to drop sharply after the labor report: now only 19.5% chance of a cut in March).
Investors also reduced expectations for the total number of projected cuts for 2024 to 5 times.

Treasury yields are rising across all maturities, , after the market changed rate cut expectations.
- Especially short-term maturities (e.g. T-bond 2Y up +10bps immediately) => exacerbating the inverted yield curve problem.

Consumer sentiment index rises the most since 2005

Consumers reassured about inflation expectations

1-year inflation expectation: 2.9% (previous month 3.1%)
5-10 year inflation expectation: 2.9% (previous month 2.9%)

→ Consumers reassured about declining inflation expectations.

January Consumer Sentiment Index: 79.0 (> expected 78.8), largest monthly increase since 2005 → Cooling inflation reinforces views on the economy and household finances.
Current conditions index: 81.9 (previous month 73.3)
Expectations index: 77.1 (previous month 66.4)

Earnings reports: Amazon, Apple, Meta, Exxon Mobil and Chevron

Amazon ER: Stock surges as revenue rises 14%

Revenue: +14% YoY, reaching 170 billion USD (beating expectations by 3.7 billion)

→ Cost-saving efforts pay off (laid off 27,000 employees in first half of 2023, cuts to Prime Video, MGM Studios and Twitch,…)

Operating profit margin: 8% (+2% YoY).
Free cash flow: 37 billion USD in the last 12 months.

AWS:

Revenue: +13% YoY, reaching 24.2 billion USD (down from 20% growth in the same period last year) → AWS growth slows as businesses cut cloud service spending.
Operating profit margin: 30% (+5% YoY).

Q1/2024 guidance, revenue ~138-143 billion USD.

AMZN stock rises more than 10% in Friday morning trading.

Apple ER: China sales drag on earnings

Revenue: +2% YoY, reaching 119.6 billion USD (beating expectations by 1.3 billion USD).
Services: +11% YoY, reaching 23.1 billion USD.
Products: +0% YoY, reaching 96.5 billion USD.
Operating profit margin: 34% (+3% YoY).
EPS: 2.18 USD (beating expectations by 0.07 USD).

Sales grew in all regions except China, down nearly 13% YoY, facing increasing competition from local companies like Huawei.

Meta ER: Breakout driven by two Chinese e-commerce platforms

Daily active users: +8% YoY, reaching 3.2 billion.
Revenue: +25% YoY, reaching 40.1 billion USD (beating expectations by 0.9 billion USD) → Strongest growth rate thanks to advertising recovery (+24% YoY).
- Shein and Temu, two Chinese e-commerce platforms, are increasingly favored by US consumers due to extremely low prices. Facebook, Instagram earn nearly 1 billion USD in ads from these companies.
Operating profit margin: 41% (+20% YoY).
EPS: 5.33 USD (beat expectations by 0.39 USD).

Q1/2024 revenue forecast: 34.5 - 37 billion USD.

META stock surges over 20% in the session, first time reaching 1.1 trillion USD market cap.

Chevron ER: Revenue down, plans 8% dividend increase

EPS: 3.45 USD (> estimate 3.21 USD).
Revenue: 47.18 billion USD (< estimate 51.62 billion USD).
Chevron's oil and gas records a 1.35 billion USD loss due to impairment costs and costs related to decommissioning obligations for assets previously sold in the Gulf of Mexico.

Nevertheless, the company approved an 8% quarterly dividend increase to 1.63 USD starting in March, pleasing investors.

Exxon Mobil ER: Production increase helps mitigate oil price impact

EPS: 2.48 USD (> forecast 2.21 USD).
Revenue: 84.3 billion USD (< forecast 85.2 billion USD).
2023 profit: 36 billion USD, down 35% YoY due to a 2 billion USD impairment charge in California from legal issues hindering production and distribution operations + strong fluctuations in crude oil prices.

Exxon expanded domestic production throughout the past year, largely focused on the vast Permian Basin in Texas and New Mexico → Production up over 18% → Slightly reduces impact of oil price drop due to Ukraine war.

Other news:

BTFP loans drop to record low of 165 billion USD after FED rate adjustment.
US House passes 78 billion USD child tax credit bill to support children in low-income households.
Oil prices drop nearly -10% in the week following Fed's hawkish move, even as OPEC+ agrees to maintain production cuts,
Tesla recalls over 2 million vehicles in the US due to small warning label font size on brake, park, and ABS systems smaller than 3.2 mm, which may increase crash risk.
Intel (INTC) delays construction progress for 20 billion USD chip manufacturing project in Ohio…
- due to market challenges and delays in US funding.