Stocks opened significantly lower today after poor Big Tech earnings and a massive jobs beat hammered bulls. Only a few hours later, though, stocks were rallying intraday. Apple (NASDAQ: AAPL) led the charge, rising as much as 4.34% despite gapping lower for a 2% loss at the open.
GOOGL, AMZN, and AAPL reported mixed earnings alongside disappointing guidance last evening, which led to a post-market slide for the major indexes. But investors were able to overlook the underwhelming quarterly results as the bear market rally accelerated through noon today, even conquering a red-hot jobs report.
The Bureau of Labor Statistics (BLS) said today that the US economy gained 517,000 payrolls last month, blowing away the +188,000 estimate. Wages grew by 0.3% month-over-month (10 cents), matching expectations. Year-over-year, wages were up 4.4%, down from 4.8% in December. Unemployment fell from 3.6% in December to 3.4% last month, hitting a record low (outside of 1953’s unemployment rate of 2.6%).
Wall Street was stunned by the jobs gain and unemployment number.
“Extremely hawkish,” said 22V Research founder Dennis DeBusschere.
“But it is what it is. Maybe some seasonal stuff going on. Or something else that is not in the headline reading. But wow….”
There was certainly some “seasonal stuff” going on, as the BLS applied its biggest seasonal adjustment ever to January’s data. Unadjusted payrolls actually fell by 2.5 million, meaning that the BLS adjusted the jobs number by over 3 million jobs. Every January sees a seasonal adjustment to account for holiday jobs falling off the books, but there’s never been an adjustment this large.
Of the 517,000 jobs added, 397,000 were service industry jobs (waiters, bartenders) and 74,000 were government positions. That’s 471,000 jobs of the total 517,000 reported.
Does that seem like good news for US labor? Not necessarily, unless you consider America’s greatest asset its bars and restaurants. The fact that wage inflation fell in line with expectations, too, made the January jobs report decidedly less hawkish than the headline print implied.
Plenty of Wall Street analysts took the bait nonetheless.
“Is Powell now wondering why he didn’t push back on the loosening in financial conditions?” asked Principal Asset Management strategist Seema Shah.
“It’s difficult to see how wage pressures can possibly soften sufficiently when jobs growth is as strong as this and it’s even more difficult to see the Fed stop raising rates and entertain ideas of rate cuts when there is such explosive economic news coming in.”
Traders were able to sniff out the misleading jobs print and stocks rallied as a result. Longer-term, many analysts still believe that a revenue crunch should bring markets lower.
“These last two days, and really all of January, have been really tough for those of us who were cautious,” said Liz Young, SoFi’s head of investment strategy yesterday.
“I don’t think that this deserves the green light. For earnings, this entire year, the story is going to be revenue, not as much about the bottom line. And revenues are dropping. We’ve heard that from everybody.”
But that kind of talk only galvanizes “team pivot,” who successfully saw through the jobs report. Does that mean the rally goes much higher from here? Probably not. Until the market shows signs of slowing, though, traders may want to hold on to their bullish positions.
