Magnificent Microsoft and Google blew analysts’ expectations out of the water, while JOLTs job data triggered Indices to react. Read on to get your update on the latest market news.
The FOMC Continues Today: Powell is Set to Make Statements
The Federal Reserve will decide today on monetary policy in the meeting that began Tuesday and ends this afternoon. It’s widely expected that they will choose to keep interest rates steady at their highest levels in over two decades, specifically keeping the federal funds rate between 5.25% and 5.50%.
However, the Federal Reserve indicated in December in the dot plot issued by each of the voting members of the Federal Open Market Committee that it could reduce rates up to six times this year, so investors will be attentive to possible updates that could be made about the previous projections; especially the report they issue after the meeting as well as President Powell’s statements at the press conference.
Although they do not decide on any change in interest rates today, what is expected is a more dovish statement on the part of the Fed since maintaining a restrictive policy, like the current one, for longer could imply the risk of an unnecessary slowdown of the economy.
JOLTs Figures Show to be Resilient
Contrary to the above, economic data shows an extraordinarily resilient economy that is reflected especially in the labor market. Yesterday the first labor market data for this week was published before the always expected Non-Farm Payroll figure.
JOLTS (job vacancies) announced that December job offers in the United States would amount to 9,026 million, compared to the 8,750 million expected. The labor market situation remains excessively tight, and this would be a reason to cause a delay in the start of rate cuts.
This data usually doesn’t trigger a big market reaction, as investors often wait for Friday’s employment data for a wider perspective. However, this time it comes just before the FOMC meeting, making the market more responsive. The JOLTs data led to spikes in bond yields, particularly the 2-year yield, which rose by 8 bps. Consequently, this pushed the dollar higher, with the EUR/USD pair dropping to the lower end of its recent trading range, around 1.0812.
Indices Shift Following JOLTs Data Announcement
The North American stock indices reacted mostly downward after the figure, although with uneven performances.
While the DowJones30 remained afloat with slight gains compared to the previous day’s close, the technological Nasdaq, more sensitive to interest rates, lost more than 1%.
Nasdaq100 5-minute chart, January 30, 2024. Source: EVP Market WebTrader.
Earnings Recap: Magnificent Microsoft and Google
At the close of yesterday’s session, two of the tech titans reported profits.
Alphabet (GOOGL)
- Revenue: $86.31B vs. $85.23B expected
- EPS: $1.64 vs. $1.59 expected
- Google Cloud: $9.19B vs. $8.94B expected
Microsoft (MSFT)
- Revenue: $62.02 vs. $61.12 expected
- EPS: $2.93 vs. $2.78 expected
Microsoft Corp. beat revenue estimates as new artificial intelligence features helped attract customers to its cloud and Windows services. Revenue grew 18% to $62 billion in the quarter ended Dec. 31, compared with analysts’ average estimate of $61.12 billion.
But despite the optimal results of both companies, during after-hours trading the shares did not have a positive performance in both cases. Microsoft was practically unchanged compared to a slightly negative close, while Alphabet’s share lost more than 4%.
Key Takeaways
- FOMC continues to meet today while traders await Powell’s speech.
- JOLTs job data moved both Indices and the Bond market.
- Bonds, particularly the 2-year yield, spiked in response to job data. Rising by 8bps.
- Google reported strong quarterly earnings beating EPS estimate by 2.53%.
- Microsoft shocked analysts with even stronger earnings, beating expectations by billions in some areas.
- Some believe Microsoft’s strong earnings is attributed to AI developments.
- Both tech companies closed the day on a downslide.
