Markets slip as tech earnings fall short

Dow went up 31, decliners ahead of advancers about 5-4 & NAZ dropped 249.  The MLP index fell 1+ to the 265s & the REIT index was up 3+ to the 382 on falling interest rates.  Junk bond funds crawled higher & Treasuries had very heavy buying, reducing yields (more below).  Oil was off 1+ to the 76s & gold shot up 20 to 2071, nearing its record high.

AMJ (Alerian MLP Index tracking fund)

Hiring by US companies slowed more than expected in Jan, a possible sign the labor market is finally slowing in the face of higher interest rates, according to the ADP National Employment Report.  Companies added 107K jobs last month, missing the 145K gain that was predicted.  The weaker-than-expected report comes in the wake of an aggressive tightening campaign by the Federal Reserve, which has hiked interest rates to the highest level since 2001.  Policymakers signaled last month that they are done raising rates amid signs that inflation is finally moderating & the economy is slowing.  In a welcoming sign for the Fed, wage growth continued to shrink in Jan.  Annual pay rose 5.2% last month, according to the report.  For workers who switched jobs, wages climbed 7.2%, the smallest annual gain since May 2021.  "Wages adjusted for inflation have improved over the past six months, and the economy looks like it’s headed toward a soft landing in the U.S. and globally," said Nela Richardson, ADP chief economist.  The job growth slowdown hit nearly every sector last month.  The leisure & hospitality industry accounted for the most gains in Jan, adding just 28K new employees.  Trade, transportation & utilities added 23K workers, while employment in construction rose by 22K.  Just one sector shed jobs last month: Information, with a decline of 9K.

US economy gets unexpected bad news as job growth stalls out to start the new year

Microsoft (MSFT), a Dow stock,  issued fiscal 2nd-qtr results that outdid estimates & a light quarterly revenue outlook.  MSFT called for fiscal 3rd-qtr revenue of $60-61B, or $60.5B at the middle of the range.  Analysts had expected $60.9B.  But the company sees lower-than-expected cost of revenue & operating expenses during the qtr, based on consensus among analysts.  MSFT's revenue increased 17.6% year over year in the qtr, which ended on Dec 31.  EPS was $2.93, increased from $2.20 in the prior year.  The Intelligent Cloud segment produced $25.9B in revenue, up 20% & above the $25.3B consensus.  The grouping contains Azure cloud infrastructure, SQL Server, Windows Server, Nuance, GitHub & enterprise services.  Within that segment, revenue from Azure & other cloud services grew 30%.  Analysts had expected 27.7% growth & the consensus was 27.5%.  The metric for the previous qtr was 29%.  6 points of the Azure & other cloud services growth were tied to artificial intelligence, Amy Hood, MSFT's finance chief, said.  MSF now has 53K Azure AI customers & 1/3 of them are new to Azure in the past year, CEO Satya Nadella said.  Revenue from the Productivity & Business Processes unit, including Office productivity software, LinkedIn & Dynamics totaled $19.2B.  That was up 13% & higher than the $18.99B consensus.  The More Personal Computing segment contributed $16.9B in revenue, up about 19% & slightly more than the consensus of $16.8B.  The segment comprises Windows, Surface, Bing & Xbox.  The stock fell 4.95 in a weak tech sector.

Microsoft issues light guidance even as Azure growth drives earnings beat

Treasury yields declined as investors awaited the latest interest rate decision & guidance on the monetary policy outlook from the Federal Reserve.  The 10-year Treasury yield was 3.7 basis points lower at 4.02% & the yield on the 2-year Treasury  was last down by more than 5 basis points at 4.31%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  The Federal Reserve is due to announce its latest interest rate decision & is widely expected to keep rates unchanged, as it has done at its previous 3 meetings.  This comes as recent economic data, including the personal consumption expenditures price index, the Fed's favored inflation gauge, have suggested that pressures from higher prices are easing.  Investors are also hoping that the central bank will provide hints about the path ahead for monetary policy & interest rates in guidance issued alongside the rate decision & Fed Chair Jerome Powell's post-meeting press conference.  Though policymakers at the last Fed meeting in Dec suggested rate cuts would be likely in 2024, they did not provide clues about when they may take place.  Traders were last pricing in a roughly 45% chance of a rate cut being announced at the next central bank meeting in Mar, CME Group’s FedWatch tool showed.

Treasury yields fall ahead of Fed interest rate decision

Earnings season is not inspiring confidence.  Meanwhile everybody is waiting to hear what Powell will have to say about interest rates going forward.  Nervous investors keep buying gold & Treasuries.

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