The Dow opened flat on Friday, as data showing an unexpected jump in U.S. job growth in January fanned fears around inflation, countering a boost from Amazon’s results at the end of a volatile week.
The Dow Jones Industrial Average was down 15.4 points, or 0.04%, at the open to 35,095.74.
The S&P 500 rose 5.4 points, or 0.12%, at the open to 4482.79, while the Nasdaq Composite rose 79.7 points, or 0.57%, to 13958.482 at the opening bell.
Canada’s main stock index opened higher and was on track for its best weekly performance since late December, with energy and technology stocks leading gains.
At 9:32 a.m. ET,, the Toronto Stock Exchange’s S&P/TSX composite index was up 100.17 points, or 0.47%, at 21,194.18.
The Labor Department’s closely watched employment report on Friday showed nonfarm payrolls increased by 467,000 jobs last month, compared with the 150,000 jobs addition forecast by economists polled by Reuters.
The data for December was revised higher to show 510,000 jobs created, instead of the previously reported 199,000.
“Employment report really stunned markets ... not only did we have a surprisingly strong number, we had a very strong revision,” said Edward Moya, senior market analyst at Oanda.
“You also have average hourly earnings coming in much hotter than expected, which is just fueling the theme that everything is just leading to more inflation.”
The U.S. labour market resilience could alter expectations that economic growth would slow significantly in the first quarter after robust growth in the fourth quarter.
Economists had been bracing for a disappointment as the government surveyed businesses for payrolls in mid-January, when Omicron infections were peaking.
Friday’s report may provide the U.S. Federal Reserve with further reasoning to start hiking interest rates and maintain a tightening spree throughout the rest of this year. Higher interest rates tend to be bad for the stock market, particularly for high-growth names in the tech sector whose valuations are more tied to future cash flows.
Yields of benchmark 10-year U.S. Treasuries hit their highest levels since January 2020 after the U.S. jobs report was released, at just over 1.9%.
“The 467,000 gain in non-farm payrolls in January is even stronger than it looks, as it came despite the spike in absenteeism driven by the Omicron virus wave and was accompanied by significant upward revisions to the gains over the preceding couple of months,” Capital Economics said in a note. “That will inevitably further fuel expectations of the Fed unleashing a larger 50bp hike at the March meeting, although we still think that a sharp slowdown in economic growth in the first quarter will give officials second thoughts.”
Canada’s TSX opened higher amid a weaker than expected jobs report on this side of the border. The Canadian economy lost a net 200,100 jobs in January, and the jobless rate jumped to 6.5% from 6.0%.
Amazon jumped 10% in early trading on plans to raise the price of its annual U.S. Prime subscriptions to offset higher costs.
The main U.S. stock indexes tumbled on Thursday after Facebook-owner Meta Platforms Inc’s shares plunged 26% following a dour outlook, thwarting the stock market’s attempt at a recovery on upbeat earnings from other megacap growth companies such as Google-parent Alphabet Inc and Microsoft Corp.
“These are eye-watering, stomach churning moves normally associated with penny stocks, and yet they are happening in companies with billion-dollar market caps,” said Michael Hewson, chief market analyst at CMC Markets UK.
Despite the earnings-driven whiplash in technology stocks, all three major stock indexes are on track to end their first week of February higher, with the indexes eyeing their second week of gains in a row.
Following losses on Thursday, smaller social media companies such as Snap Inc surged 46.6% after reporting better-than-expected fourth-quarter user growth and outlook.
Pinterest Inc rose 13.1% after its quarterly revenue beat estimates as retailers splurged on advertising during the holiday quarter, while Twitter Inc, expected to report results on Feb. 10, rose 5.5%.
As of Thursday, 260 S&P 500 companies have reported results so far during this earnings season, and 78.5% of them have beaten analysts’ earnings estimates, compared with an average of 84% over the past four quarters, according to Refinitiv data.
The Toronto Stock Exchange’s S&P/TSX composite index ended 1.3% lower at 21,094.01 on Thursday, after four straight days of gains.
Equities
Commodities
Oil prices reached seven-year highs on Friday as geopolitical tensions and a winter storm in the United States fueled concerns over supply disruptions.
Brent crude rose $1.32, or 1.5%, to $92.43 a barrel by early morning, having earlier touched its highest since October 2014 at $92.66.
U.S. West Texas Intermediate crude rose $1.45, or 1.6%, to $91.72 a barrel after also scaling a seven-year peak at $91.91.
Both benchmarks were on course for a seventh consecutive weekly gain.
“The latest upswing was triggered by a cold snap in Texas, which is fueling concerns about production outages in the Permian Basin, the largest U.S. shale play,” said Commerzbank commodities analyst Carsten Fritsch.
A massive winter storm swept across central and northeast regions of the United States on Thursday, knocking out power to thousands.
Tight oil supplies pushed the six-month market structure for WTI into steep backwardation of $8.40 a barrel on Friday, the widest since November 2021.
Backwardation exists when contracts for near-term delivery are priced higher than those for later months, encouraging traders to release oil from storage to sell it promptly.
Oil markets have also gained support from tensions surrounding the Ukraine crisis, which have heightened concerns over oil supplies that are already tight.
Gold prices rose on Friday and were headed for a weekly gain as a retreat in the dollar has propped up bullion in the run-up to data on U.S. jobs growth, which is expected to have slowed sharply in January.
U.S. gold futures climbed 0.4% to $1,811.30.
Gold is set to gain over 1% this week as the dollar faced its worst weekly decline in nearly two years, making the bullion cheaper for overseas buyers.
Currencies and bonds
The Canadian dollar is lower this morning against the greenback in a continuation of a weak tone in recent days. That may be a surprise for some, given that crude has gained for seven consecutive weeks.
“Historically, such elevated prices for crude have been associated with a significantly stronger CAD than we are seeing at the moment, suggesting a fair degree of unrealized potential in the CAD at the moment, all else equal,” commented Scotiabank forex strategists in a note. “Risk sentiment and the recent compression in [U.S.-Canada bond] spreads are handicapping the CAD’s performance to some extent but the broader strength in commodity prices does confer a significant terms of trade benefit to the Canadian economy which suggests the CAD really should be trading higher than it is.”
Losses in the loonie picked up in the wake of the jobs reports. The strong U.S. number, combined with the weak one in Canada, suggests bonds yields could accelerate faster in the U.S. than here for some parts of the yield curve. That makes the greenback more attractive on a relative basis.
Other corporate news
Ford Motor Co fell 5.6% on missing fourth-quarter earnings estimates, while household products maker Clorox Co dropped 12.8% after trimming its annual profit outlook. (Reporting by Bansari Mayur Kamdar and Medha Singh in Bengaluru; Editing by Shounak Dasgupta)
Short-seller Hindenburg Research alleged on Thursday that Standard Lithium Inc’s plan to produce lithium for electric-vehicle batteries in Arkansas is based on technology that does not work. That sent Standard’s shares down 27% and erased $305.7 million from the company’s market value.
Cruise operator Royal Caribbean Group said on Friday that the spread of the Omicron coronavirus variant would delay its return to profitability by a few months after posting a bigger loss than expected in the fourth quarter.
Kohl’s Corp said on Friday it had received buyout offers that undervalued the company as they did not reflect its future growth and cash flow generation. Kohl’s also said it had adopted a shareholder rights plan, popularly known as a “poison pill”- a defensive strategy to avert hostile takeovers.
Rogers Communications Inc raised $750 million in financing late Thursday, half the amount the telecom company targeted when it began marketing the offering earlier this week.
Brookfield Asset Management Inc has picked up a stake in Hopper Inc in a secondary financing that establishes the Montreal online travel company as one of Canada’s most valuable private technology enterprises.
CES Energy Solutions was downgraded by: National Bank of Canada to “sector perform” from “outperform”
Sienna Senior Living Inc was upgraded by: Canaccord Genuity to “buy” from “hold”
Suncor Energy Inc: was downgraded by JP Morgan to “neutral” from “overweight”
Economic news
The Canadian economy lost a net 200,100 jobs in January, more than expected, and the jobless rate jumped to 6.5% from 6.0% in December, Statistics Canada data showed on Friday. Economists polled by Reuters had predicted a loss of 117,500 jobs and for the unemployment rate to increase to 6.2%.
The U.S. economy created far more jobs than expected in January even as raging COVID-19 infections disrupted activity at consumer-facing businesses, pointing to underlying strength in the labor market. The survey of establishments in the Labor Department’s closely watched employment report on Friday showed nonfarm payrolls increased by 467,000 jobs last month. Data for December was revised higher to show 510,000 jobs created instead of the previously reported 199,000. Economists polled by Reuters had forecast 150,000 jobs added in January. Estimates ranged from a decrease of 400,000 to a gain of 385,000 jobs.
(10 a.m. ET) Canada’s Ivey PMI for January.
Earnings include: Bristol-Myers Squibb Co.; Brookfield Business Partners LP; Brookfield Renewable Partners LP; Regeneron Pharmaceuticals Inc.
With files from Reuters