S&P 500 surges to record closing high on solid earnings, robust data

It was just yesterday that investors were celebrating a cooling job market, which was good news on the inflation front, and today there was more celebration of a roaring job market as the January report came in with almost twice the expected number at 353,000 new jobs. Add to that solid Q4 reports from two of the Magnificent Seven – Meta and Amazon – and there was indeed enough celebrating to put the Dow and Nasdaq into 3-digits for a second day and the S&P to still another record high. 

But all this vigor is making it more and more likely that the Fed will continue to delay the rate cuts which are now at a mere 20% for March. The S&P has now received 230 reports with 80% beating estimates and the earnings growth forecast now at 7.8% vs 4.7% January 1^st, an impressive jump.  As always, there is more data coming next week (isn’t there always more data coming next week?) so trading remains light at 11.2 billion. 

S&P 500 surges to record closing high on solid earnings, robust data

By Stephen Culp

Fri February 2, 2024  4:31 PM

DJ: 38,519.84  +369.54        NAS: 15,361.64  +197.63       S&P: 4,906.19  +60.54     2/1

DJ: 38,654.42  +134.58        NAS: 15,628.95  +267.31       S&P: 4,958.61  +52.42     2/2

NEW YORK, Feb 2 (Reuters) - U.S. stocks ended sharply higher on Friday and the S&P 500 registered an all-time closing high as strong earnings and a blowout January employment report boosted confidence in the economy, even while lowering the likelihood that the Federal Reserve will cut interest rates any time soon.  The rally capped a tumultuous week filled with high profile earnings, a Fed rate decision, and renewed jitters over regional banking weakness.  Solid quarterly results from Meta Platforms (META.O), opens new tab and Amazon.com (AMZN.O), opens new tab helped boost the S&P 500 index (.SPX), opens new tab and the Nasdaq Composite Index (.IXIC), opens new tab over 1%, while the blue-chip Dow Jones Industrial Average's (.DJI), opens new tab gain was more muted.  All three major U.S. stock indexes notched their fourth consecutive weekly gains.

"Earnings were strong for most companies this week, and we believe the Fed meeting was bullish because it properly set expectations for May or June rate cuts," said Jay Hatfield, portfolio manager at InfraCap in New York.

The U.S. added 353,000 jobs in January, blasting past analysts' estimates, while wage growth unexpectedly heated up, the Labor Department reported. 

The added signs of economic vigor made it more likely that the U.S. central bank will delay cutting its key policy rate until much later than many had hoped. Fed Chair Jerome Powell on Wednesday pushed back against the notion of a March rate cut.  Financial markets are pricing in a 20.5% likelihood of a 25 basis point rate cut at the Fed's March meeting, down from 69.6% a month ago, according to CME's FedWatch tool.  "Looking ahead to the next few days, investors are laser focused on upcoming earnings and economic reports to identify more consistency in the data to gauge the extent and timing of Fed rate cuts," said Greg Bassuk, chief executive officer of AXS Investments in New York.

Fourth-quarter earnings season is barreling along, with 230 of the companies in the S&P 500 having reported. Of those, 80% have come in above Wall Street expectations, according to LSEG.  On aggregate, analysts now see year-on-year S&P 500 earnings growth of 7.8% for the October-to-December period, a significant improvement over the 4.7% estimate as of Jan. 1.

Meta Platforms surged 20.3% to a record high after issuing its first dividend days ahead of the 20th anniversary of its Facebook unit.  Amazon.com (AMZN.O), opens new tab jumped 7.9% following a fourth-quarter revenue beat as new generative artificial intelligence features in cloud and ecommerce businesses spurred robust growth during the year-end holidays.

Regional bank shares stabilized after two straight days of sharp sell-offs sparked by disappointing earnings from New York Community Bancorp (NYCB.N), opens new tab. The bank's stock rebounded on Friday, rising 5.0%, while the KBW Regional Banking index (.KRX), opens new tab advanced 0.2%.

The S&P 500 climbed 1.07% to end the session at 4,958.61 points. The Nasdaq gained 1.74% to 15,628.95 points, while Dow Jones Industrial Average rose 0.35% to 38,654.42 points.  Of the 11 S&P 500 sector indexes, six rose, led by communication services (.SPLRCL), opens new tab, up 4.69%, followed by a 2.49% gain in consumer discretionary (.SPLRCD), opens new tab.

Cigna (CI.N), opens new tab rose 5.4% after the health insurance provider hiked its annual profit forecast.  Microchip Technology (MCHP.O), opens new tab dropped 1.6% in the wake of the chipmaker's disappointing sales forecast.  Footwear maker Skechers U.S.A (SKX.N), opens new tab also provided a downbeat forecast, sending its shares down 10.3%.  Oil supermajor Chevron Corp (CVX.N), opens new tab gained 2.9% after beating analyst estimates.

Declining stocks outnumbered rising ones within the S&P 500 (.AD.SPX), opens new tab by a 1.2-to-one ratio.  The S&P 500 posted 68 new highs and four new lows; the Nasdaq recorded 75 new highs and 144 new lows.

Volume on U.S. exchanges was relatively light, with 11.2 billion shares traded, compared to an average of 11.6 billion shares over the previous 20 sessions.