The stock market rally staged a follow-through day on Monday, then added to weekly gains despite a big Thursday sell-off. Google parent Alphabet, Amazon.com, AMD, Snap and UPS were earnings winners, while Facebook parent Meta Platforms and PayPal crashed on results. The jobs report was much stronger than expected, sending the 10-year Treasury yield spiking to a fresh two-year high.
Stock Market Rally
The S&P 500 and Nasdaq staged followed-through days Monday, confirming the new market rally. Stocks added to gains the next two sessions before selling off hard on Facebook parent Meta Platforms' earnings report. But Google, Amazon, AMD, Snap and UPS were among the earnings winners. The 10-year Treasury yield shot up to a two-year high on a surprisingly strong jobs report. Crude oil futures surged yet again amid tight supplies and rising demand.
Jobs Report Strong
January's jobs report was remarkably strong, with employers adding 467,000 workers, despite the omicron surge that peaked mid-month. Average hourly wages jumped 5.7% from a year ago, but that's less than inflation. The jobless rate, which is based on a separate household survey, ticked up to 4%, but that reflects a big jump in labor force participation. The jobs report sent the 10-year Treasury yield surging to a Covid-era high of 1.93%. Fast wage growth explains why underlying inflation remains too high for the Fed. Meanwhile, supply-chain pressures on inflation aren't likely to fade quickly either. The ISM manufacturing index indicated slower-but-still-strong growth in January, but the prices paid component sprang higher.
Google Beats, Declares Big Split
Google-parent Alphabet reported strong Q4 results and announced a 20-for-1 stock split for July 15. The split could pave the way for the tech giant to enter the Dow Jones Industrial Average. Q4 EPS jumped 38%, while gross revenue rose 32% to $75.33 billion, both comfortably topping estimates. Internet search and other revenue rose 36% to $43.3 billion vs. estimates of $40.95 billion. Cloud-computing revenue rose 45% to $5.54 billion vs. estimates of $5.57 billion. Google cloud cut its operating loss to $890 million, missing estimates of a lower $758 million loss. GOOGL stock jumped, then pared gains.
Facebook Crashes, Snap Soars
Social media stocks went on a wild roller coaster ride that began when Facebook parent Meta Platforms reported fourth-quarter results that missed estimates across the board and included a drop in users for the first time. FB stock dived 26% Thursday and set a record for the biggest drop in market value in a single day. Other social media stocks tumbled with it. Snap plunged 24% while Pinterest dropped 10%. But Snap and Pinterest beat views late Thursday. Snap skyrocketed Friday, with Pinterest slightly higher.
Amazon Earnings Beat
Amazon smashed earnings views, helped by a pretax valuation gain of $11.8 billion in nonoperating income from its investment in electric truck maker Rivian. Revenue rose 9%, slightly missing, but cloud computing and advertising revenues were up sharply. Shares jumped Friday but fell for the week.
Cybersecurity Earnings Top
Three cybersecurity software firms topped quarterly estimates.
Fortinet reported Q4 EPS up 16%, revenue 29% and billings 36%. It guided higher for full-year 2022. CheckPoint Software reported Q4 EPS climbed 4% while revenue rose 6% to $599.1 million. Tenable Holdings reported Q4 EPS fell 62% while revenue grew 26% to $149 million.
Exxon Beats, OPEC+ Ups Output
Oil prices rose and Brent crude oil hit $90 per barrel. Exxon Mobil reported Q4 earnings that topped Wall Street estimates. The oil major also announced that it would reorganize into three business units, combining its chemicals and refining divisions into a single reporting segment to cut costs. OPEC+ agreed to continue its measured production increase of 400,000 barrels per day next month. But analysts are concerned about the group's ability to hit its output targets as demand grows.
AMD, NXP Outperform
Advanced Micro Devices and NXP Semiconductors saw their shares rise after they delivered better-than-expected fourth-quarter results and guidance. Other chipmakers with robust beat-and-raise earnings reports in the past week included Qualcomm, Synaptics and MaxLinear. Semiconductor equipment firms FormFactor and Kulicke & Soffa followed the pattern set by industry peers KLA and Lam Research by disappointing investors with soft guidance.
Distributors' Diverging Paths
Drug distribution giants McKesson and AmerisourceBergen both raised their full-year profit forecasts, citing their role in rollouts of coronavirus vaccines and therapeutics in the U.S. and internationally. McKesson's quarterly results beat. AmerisourceBergen's results were mixed. Distribution peer Cardinal Health also reported a sales and earnings beat. But it cut its full-year profit outlook, reflecting a forecast given last month, citing inflation, supply-chain issues, and a "lower-than-expected offset from pricing actions."
UPS Upbeat On 'Firm' Pricing
Package-delivery giant UPS reported fourth-quarter results that beat expectations, and it hiked its quarterly dividend. The company also issued a 2022 sales forecast that came in above estimates, and said it expected pricing in the U.S. to "remain firm" this year. The results came after a busy holiday season, during which labor and supply-chain issues pushed shipping prices higher and raised questions about the U.S. transportation infrastructure's ability to meet demand.
Trucking Firms Generally Beat
A trio of shippers scored overall earnings and revenue beats, amid surging freight demand. ArcBest posted a 188% EPS surge on a 45% sales increase to $1.185 billion. Saia reported an 83% EPS increase on a 300% revenue gain. Old Dominion Freight Line saw a 50% EPS jump on a 31% EPS increase. On the downside, C.H. Robinson Worldwide missed on earnings, sending shares tumbling.
GM, Ford Fall On Results
General Motors posted a 30% earnings decline, easily beating Wall Street views. Revenue fell 10.5% to $33.584 billion, a big miss. Ford posted a surprise 26% EPS drop on a 5% sales gain, missing views overall. GM forecast a 25%-30% rebound in production volumes and sees chip supplies improving in Q1 and throughout 2022. Ford sees volumes declining in Q1 but recovering in the back half of the year. Year over year, Ford's EV sales surged 167% to 13,169 in January, while total U.S. sales were flat. Industrywide, the annualized pace of U.S. new vehicle sales reached 15.2 million units in January, up from 12.7 million in December, largely reflecting generous seasonal factors, Deutsche Bank analysts said.
China EV Sales Strong
EV giant BYD more than quadrupled January EV sales while startups Xpeng Motors and Li Auto more than doubled January sales, outselling Nio, which grew sales by one third. All saw lower EV sales vs. December, amid the Chinese New Year business shutdown and an EV subsidy cut. In 2021, China EV sales boomed 169% to a record 2.99 million vehicles, or 14.8% of new sales.
AbbVie Rises On Mixed Earnings
AbbVie earnings per share climbed 13%, topping forecasts. Sales grew 7.4% to $14.89 billion, narrowly missing. Shares of the medical products giant rose to a new high.
Drug Earnings Mixed
Merck reported an 84% EPS gain with sales up 24% to $13.52 billion, both easily beating, but the drugmaker guided low for 2022. Eli Lilly also scored a fourth-quarter beat as sales rose 8% to nearly $8 billion and EPS also climbed 8%. Biogen also reported consensus-topping sales and earnings, though they fell 4% and 26%, respectively. Regeneron Pharmaceuticals crushed quarterly estimates with EPS up 149% and sales up 104% to $4.95 billion. Bristol Myers Squibb reported EPS up 25%, beating, but the 8% sales gain to $11.99 billion was a little light.
News In Brief
AT&T said it will spin off WarnerMedia to shareholders as a precursor to the unit's planned Q2 merger with Discovery. The new entity will become Warner Brothers Discovery and trade under the ticker WBD. AT&T's dividend will fall by 46% as a result. AT&T shares tumbled.
PayPal plunged after its December-quarter earnings and total payment volume missed estimates, while revenue was in line. PayPal's 2022 profit guidance and its outlook for customer growth missed as well. Also, PayPal abandoned five-year financial targets.
Starbucks, the coffee-chain, reported fiscal first-quarter revenue and same-store sales that beat expectations. But earnings missed. The company also warned that inflation, Covid-related pay and other costs could take a bigger bite out of profit for the year. Shares fell.
