Bursting Of The Balloon

Key Takeaways

Friday’s Jobs Number Needs Addressing More Layoffs In Tech Disney Reports Later This Week

A significantly stronger than expected jobs report on Friday took markets by surprise. However, despite Friday’s pullback, markets did finish the week higher. The S&P 500 was up nearly 2%, while the Nasdaq 100 tacked on nearly 3.5%. Following an abysmal 2022, the tech sector has come out swinging this year.

Within the tech space, two names really stand out so far. Facebook parent, Meta, was up 23% last week following a strong earnings report. For the year, the stock is up 55%. Another standout has been Tesla. That stock is up 54%. Much of the strength in tech stocks comes as market concerns eased about the need to raise and maintain higher interest rates. However, the January employment report may let some of the air out of that balloon.

I found the most interesting aspect to Friday’s jobs number to be the widespread nature of jobs created. It was not a sector specific uptick in hiring as is often the case. Rather, job growth in many areas picked up. This comes despite a number of well-known companies announcing layoffs in the last six months, the latest being Dell, who just announced the elimination of nearly 5% of their workforce. While the Federal Reserve typically does not make adjustments to interest rate policy based on one data point, when Jerome Powell speaks later this week, he is likely to face questions about how he interprets the employment situation. Right now, the market expects two more, quarter point, rate hikes by May. That would take rates up to 5.25%. Currently, interest rates on the benchmark 10 year note are flirting with 3.6%.

In other news this morning, Newmont Mining NEM is making an offer for Australian miner, Newcrest Mining valued at $17 billion. I see this as a potentially encouraging sign following a weak year for mergers and acquisitions. Meanwhile on the earnings front, the number of companies reporting this week will remain strong; however, with the exception of Disney, we’ve largely moved to the B-side of the record.

Heading into the day, futures are pointing lower by just under 1% in premarket trading. With little in the way of economic data and big name companies reporting this week, it could be a lot like a game of Scrabble where all you have are a bunch of consonants. Then again, markets do have a way of surprising investors when they least expect it. As always, I would stick with your investing plan and long term objectives.

tastytrade, inc. commentary for educational purposes only.