Stocks extended their record-setting run Friday, with the S&P 500 and Dow Jones average setting fresh record closing highs, as a blockbuster jobs report bolstered the outlook for corporate profits. A rally in tech stocks was sparked by Meta’s strong earnings report and announcement of its first-ever quarterly dividend, lifting shares by more than 20%, and Amazon popped 8% after its own earnings topper. The tech rally helped shift investor focus away from a much stronger than expected non-farm payrolls report that pushed the benchmark 10-year Treasury yield up by a whopping 17 basis points to 4.02%, and likely killing off any lingering chance that the Federal Reserve might start cutting interest rates in March. For the week, the S&P and Dow each added 1.4% and the Nasdaq Composite rose 1.1%, all higher for the fourth straight week. Read Seeking Alpha’s Catalyst Watch for a preview of next week’s major events.
Saudi Arabia ordered state-owned Aramco (ARMCO) to maintain its oil production capacity, marking a major reversal from the energy giant’s plan to boost capacity. Maximum Sustainable Capacity of the world’s largest crude producer will be maintained at 12M bbl/day, instead of a planned capacity expansion to 13M bbl/day by 2027. The directive came amid growing oil demand concerns, as well as countries steadily shifting from oil to natural gas and renewables. The International Energy Agency had previously forecast that fossil fuel demand will likely peak before 2030, a prediction that many in the industry – including Aramco head Amin Nasser – have rejected. (5 comments)
Microsoft (MSFT) shares were largely unchanged after the tech behemoth reported Q2 earnings that topped expectations, aided by strong results from its Azure cloud business and new AI features. Alphabet (GOOGL) was met with a colder reception, sliding 5.7% AH on Tuesday amid some disappointment over advertising sales growth. More earnings continued to roll in on Thursday as investors sized up the rest of the tech giants. Meta Platforms (META) soared 15.2% AH after the company’s first-ever dividend stunned investors, while Amazon (AMZN) climbed 7.1% on a strong beat and Q1 guidance. Apple (AAPL) was also in the spotlight as concerns about the firm’s presence in China outweighed the end of four straight quarterly sales declines. (88 comments)
New York Community Bancorp (NYCB) sank nearly 38% on Wednesday after the bank swung to a surprise Q4 loss as it prepared for stricter capital requirements due to the acquisition of Flagstar Bank in 2022 and Signature Bank in 2023. NYCB added to reserves and cut its dividend as assets crossed the $100B threshold, while commercial real estate concerns compounded investor worries. Note that NYCB had an SA Quant Dividend Safety Grade of D+. The regional lender then slid a further 11% on Thursday after two analyst downgrades, while Investing Group Leader Trapping Value wrote that it will take at least six quarters to rebuild confidence in NYCB. (248 comments)
It’s settled – there will likely be no interest rate cut next month, although Fed Chair Jerome Powell signaled it could happen at some point this year. “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that,” he declared after the Fed maintained its policy rate at 5.25%-5.50% yet again. “We need to see more evidence that tells us we are on a sustainable path to 2% inflation.” Such confirmation and other hawkish comments pushed stock markets and yields lower on Thursday. “Powell is concerned that the timing of the cut has to be immaculate,” noted Yimin Xu, on behalf of Investing Group Leader Cestrian Capital Research. “Cutting too soon risks a return of inflation, but cutting too late can trigger an economic downturn.” (90 comments)
Federal Judge Allen Winsor dismissed Disney’s (DIS) lawsuit against Florida Governor Ron DeSantis and other state officials, saying the company lacked legal standing to sue the defendants on a claim that they violated its free speech rights. The saga began with a controversy over the Parental Rights in Education Act, commonly referred to as the “Don’t Say Gay” law, but quickly escalated to other areas. Making other big court news was a Delaware judge voiding Elon Musk’s hefty $55B pay package at Tesla (TSLA). Musk has since threatened to incorporate the company in Texas and also revealed this week that the first human had received a brain implant from another one of his ventures called Neuralink.
