U.S. stocks went up on Thursday, following the market’s largest two-day fall since October. This was as investors awaited earnings reports from three major technology companies: Apple Inc., Amazon.com, and Meta Platforms. The S&P 500 declined by 1.7% over the last two trading days, marking the biggest decrease in percentage points in a two-day period since October 27, based on Dow Jones Market Data.
Investors were focused on the upcoming earnings from Big Tech companies and were also reacting to Federal Reserve Chairman Jerome Powell’s remarks during Wednesday’s post-meeting press conference. These factors are expected to influence market sentiment for the rest of the week, along with the labor market’s economic data.
Earnings reports from Microsoft, Alphabet, and Advanced Micro Devices released late Tuesday did not meet the AI-driven optimism that had driven the market to a record high earlier in the week. Soon, investors will assess the earnings of three more Big Tech stocks, namely Apple, Meta, and Amazon.com, which will be announced after the close on Thursday. If these results fail to meet Wall Street’s high expectations, stocks could experience further declines, according to one analyst.
“The majority of investors have been waiting to take advantage of selling the overextended tech rally with the slightest misstep,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. She warned that the results from Apple, Amazon, and Meta needed to “blow investors’ minds,” otherwise, a tech selloff could gain momentum.
Other companies releasing their results on Thursday include Altria, Peloton Interactive, Merck, and Honeywell International before the opening bell. After the close, investors will also receive earnings from Atlassian, U.S. Steel, and Skechers. Investors will also be keeping an eye on the regional banking sector, especially after New York Community Bancorp’s shares plunged as the lender highlighted commercial real estate difficulties. Aozora, a Japanese bank, issued a profit warning as it reduced the value of its U.S. office portfolio and nursed losses on U.S. and European bonds.
Investors also continued to weigh the potential timing of the Fed’s decision to reduce borrowing costs. Fed Chair Jay Powell stated at his post-meeting press conference on Wednesday that a rate cut in March was “not the most likely case or the base case.” Despite the disappointment expressed by investors, fixed income futures markets now indicate a greater certainty of rates falling at the subsequent Fed meeting in May. Futures traders also anticipate around 150 basis points of cuts happening this year.
“It’s very much a case of train delayed, not cancelled, at this point,” said Steve Clayton, head of equity funds at Hargreaves Lansdown. He added that investors are likely to be less forgiving if any emerging data suggests that the economy still has room to keep inflation bubbling.
Investors have been receiving various economic data this week about the U.S. labor market. The latest release included the weekly report on initial jobless claims, which showed an increase to a nearly three-month high of 224,000 at the end of January. This could potentially indicate a softening in the strong labor market. The quarterly report on productivity revealed that American workers became even more productive during the fourth quarter, suggesting that the U.S. economy may be growing faster than expected.
Later in the day, investors will receive the final reading of the S&P manufacturing PMI survey for January at 9:45 a.m. The January ISM manufacturing report is due at 10 a.m., along with December construction spending. On Friday, investors will receive the Labor Department’s nonfarm payrolls report for January, which is seen as a significant piece of economic data.
