Weekly Market Recap

Published Feb. 05, 2022
Weekly Market Recap

WEEKLY MARKET SUMMARY

Dow Jones S&P 500 Nasdaq
35,089 (+1.15%)
4,500 (+1.55%)
14,098 (+2.07%)

This week’s earnings report from big firms is led by Big Tech and autos.

The frenzy of large firms reporting earnings takes a respite on Monday before resuming for the rest of the week. So far, Wall Street has been unimpressed by some of the tech sector’s results, with shares of Tesla, Intel, and Netflix all plunging precipitously after each report. Last week, though, Apple and Microsoft fared better, which bodes good for the remaining mega caps. Following Chevron’s earnings failure on Friday, Exxon Mobil, Alphabet’s parent company Google, and General Motors are all set to report on Tuesday. Meta Platforms, Facebook’s parent company, will be disclosed on Wednesday, followed by Amazon, Merck, and Ford the following day.

UPS and Exxon report great quarterly results, and their stock prices climb.

Alphabet, Google’s parent company, and General Motors are the first major firms to announce earnings after the bell on Tuesday. Exxon Mobil and United Parcel Service were two of the corporations that reported profits before the market opened. In pre-market trading on Tuesday, UPS shares soared more than 9% after the world’s biggest delivery company boosted its full-year revenue forecast. UPS also had a solid fourth-quarter profits and sales performance. The firm boosted its quarterly dividend by around 50%.
Exxon Mobil reported mixed fourth-quarter results on Tuesday, topping adjusted profits per share but falling short of sales estimates. Higher energy prices increased the company’s quarterly profits to $8.87 billion, the highest level in seven years. Exxon also announced a new $10 billion stock buyback programme, bringing repurchases back after a five-year sabbatical. In pre-market trade, Exxon’s shares increased slightly.

Tesla has issued a recall, while FedEx has suspended certain services due to Covid.

Tesla is recalling 53,822 cars in the United States that are equipped with the company’s Full Self-Driving software, which may lead certain models to do so-called rolling stops rather than coming to a full stop at specific intersections. According to the National Highway Traffic Safety Administration, Tesla will deactivate the rolling stop feature through an over-the-air software update.

FedEx ceased domestic express freight services, including FedEx two-day and three-day freight services, on Tuesday due to a manpower shortage. International economic freight pick-up services, which had previously been suspended, were resumed on Monday. FedEx said last month that the spreading omicron type has resulted in a manpower scarcity and delays in the delivery of products by aircraft.

AT&T intends to split off WarnerMedia for $43 billion. Merger of Discovery Media

AT&T said on Tuesday that it would spin off its WarnerMedia division in a $43 billion transaction with Discovery to unify its media businesses. Although the agreement to unravel AT&T’s $85 billion purchase of Time Warner was announced early last year, financial details were not disclosed until Tuesday. AT&T investors will control 71% of the new Warner Bros. Discovery firm, with each AT&T share worth $0.24 in Warner Bros. Discovery stock. AT&T just stated that it would cut its dividend in half.

PayPal falls as a result of poor guidance; AMD rises as a result of a positive outlook.

PayPal’s stock plummeted more than 18 percent in the premarket after the business published disappointing fourth-quarter results after the market closed Tuesday. The digital payments company’s fourth-quarter profits were somewhat lower than expected, although revenue was slightly higher. However, it was the stock’s forecast that caused the greatest harm.

The stock of Advanced Micro Devices jumped 11% in premarket trade on Wednesday, a day after the chipmaker reported fourth-quarter profits and revenue that were above forecasts, as well as a robust full-year sales forecast. As the Xilinx acquisition nears completion, AMD is preparing to acquire additional firepower to compete with Intel in the data centre semiconductor market.

GM expects excellent full-year profits as the chip scarcity subsides.

GM’s shares rose more than 2% in premarket trade after the carmaker announced late Tuesday that it expects to earn an operational profit of $13 billion to $15 billion this year, as a semiconductor shortfall that impeded vehicle production and sales for most of last year appeared to be subsiding. GM had a mixed fourth quarter, exceeding profitability but falling just short of sales estimates.

Starbucks profits fall short due to increasing expenses, and the CEO predicts more inflation.

Starbucks shares fell 3% in pre-market activity Tuesday after the coffee giant said after the bell that rising expenditures are weighing on profitability, forcing the company to fail fiscal first-quarter earnings predictions and cut its full-year profit outlook. Starbucks surpassed expectations in the first quarter in terms of sales. CEO Kevin Johnson forecast more inflation for the remainder of the year on the company’s results call.

Initial claims for unemployment benefits decline ahead of Friday’s jobs report.

The Labor Department published 238,000 initial jobless claims for the week ending January 29th, exactly one day after ADP revealed that U.S. firms cut 301,000 jobs in January due to the omicron variant surge. This is less than the previous week and less than was projected. The government’s January employment report, which expects a 150,000-job rise in nonfarm payrolls, is due out on Friday. However, Wall Street is starting to wonder if such additions will be limited or deleted. It’s worth noting, though, that during the epidemic, ADP figures were not always a strong prediction of the monthly employment report.

Nonfarm payrolls in January greatly exceeded estimates.

The US economy gained 467,000 jobs in January, according to the Labor Department. This was substantially better than the 150,000 gain in nonfarm payrolls predicted by economists. As the paper went to press, expectations were all over the place, with worries that a jump in Covid cases owing to the rampaging omicron variant would throw the statistics off. Last month, many economists, including those at PNC, Jefferies, Morgan Stanley, and Goldman Sachs, expected significant job losses. Obviously, this did not occur. The unemployment rate in the United States rose to 4% in January, somewhat more than projected.

Aside from the employment data, the Federal Reserve is watching for signs of inflationary pressures, such as oil prices in the United States reaching beyond $90 per barrel, exceeding October 2014 highs. In order to combat rising inflation, the Fed is expected to hike interest rates several times this year, starting in March.

Snap gains more than 40% on higher-than-expected earnings.

Snap’s fourth-quarter adjusted profits more than quadrupled estimates. Revenue and user growth also exceeded expectations. Snapchat’s parent firm, Snap Inc., also voiced hope. While Snap claims to be making progress in adhering to Apple’s new privacy regulations, which affect ad tracking, the company faces similar headwinds as Meta, which estimated a $10 billion revenue impact this year as a consequence of the Apple changes. “It will take at least a few more quarters for our advertising partners to have complete trust in our new measurement solutions,” Snap’s CFO said on the company’s post-earnings call.

Ford’s stock plummets after results and a sales shortfall due to supply chain difficulties.

Ford’s stock, which had surged 78% in the previous year, was predicted to fall more than 7% at the start of trading on Friday. The automaker’s adjusted fourth-quarter profits were far lower than expected, as was sales. Ford’s investment in Rivian increased net income throughout the year. According to the company’s CFO on the post-results conference, Ford’s annual profitability projection for 2021 was fulfilled, but production objectives were missed owing to supply chain difficulties, notably a persistent shortage of semiconductor chips. The business issued good forecast for 2022.

The 10-year Treasury yield has risen beyond 1.9 percent, reaching its highest level since 2019.

Government bond yields rose globally after a strong report on the job situation in the United States raised investors’ hopes that central banks would gradually boost interest rates to battle inflation.

The 10-year Treasury yield, which is used to calculate borrowing rates for everything from mortgages to corporate loans, concluded at 1.930 percent, the highest closing since December 2019. After years of being below zero, the German bund rose to 0.2 percent, its highest level in almost three years and a step closer to positive territory.
Yields in Europe started to increase after European Central Bank President Christine Lagarde said on Thursday that inflation was higher and more persistent than expected, clearing the path for interest rate rises this year. Expectations that the Federal Reserve would raise interest rates many times in 2022 sparked an early-year bond sell-off, leading financial markets to tremble and stock and other risky assets to plunge.

The changes were made after the US Department of Labor released statistics indicating that companies in the US gained 467,000 jobs in January. Economists had projected a bigger drag from the most recent wave of Covid-19 cases, thus this came as a huge surprise. The unexpectedly strong figures, along with higher adjustments to prior months, pave the path for the Fed to tighten policy.

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