Markets are mixed after earnings reports and January job data

Dow was up 14, decliners over advancers 3-1 & NAZ fell 217.  The MLP index declined 2 to the 262s & the REIT index retreated 6+ to the 375s.  Junk bond funds were sold & Treasuries had selling, raising yields.  Oil slid back 1+ to the low 72s & gold lost 19 to 2051.

AMJ (Alerian MLP Index tracking fund)

US job growth unexpectedly surged in Jan, underscoring the resilience of the labor market even in the face of high interest rates and stubborn inflation.  Employers added 353K jobs in Jan, the Labor Dept said in its monthly payroll report, easily topping the 180K gain forecast.  The unemployment rate held steady at 3.7%, against expectations for a slight increase.  Wage growth also accelerated last month, with average hourly earnings, a key measure of inflation, rising 0.6%, double what had been expected.  On an annual basis, wages rose 4.5% in Jan.  However, that coincided with a drop in average hours worked, which fell by 0.2 hour last month to 34.1 hours.  In another show of strength for the economy, the report contained sizable upward revisions to job growth during the previous 2 months.  Gains for Nov & Dec were revised up by a total of 126K jobs to a respective 182K & 333, suggesting that the labor market is stronger than it previously appeared.  The surprisingly strong report paints a picture of a job market that has gone largely unscathed despite the Federal Reserve's aggressive interest-rate hike campaign, but it also diminishes the odds of an imminent rate cut.  The Federal Reserve signaled it is closely watching the report for evidence that the labor market is finally softening after months of solid job gains as policymakers try to ensure that inflation continues to ease.  The consumer price index has cooled considerably in recent months but remains above the Fed's preferred 2% target, despite 11 rate hikes in the span of 16 months.  Faster job growth and the unexpected uptick in wage gains complicate the central bank's plans to start unwinding tighter monetary policy.  Policymakers held interest rates steady at the conclusion of their meeting & signaled that they are prepared to cut interest rates later this year.

US job growth unexpectedly jumps as economy adds 353,000 new positions

Apple (AAPL), a Dow stock, earnings beat estimates for revenue & earnings, but it showed a 13% decline in sales in China, one of its most important markets.    Quarterly EPS was $2.18 vs $2.10 expected on revenue of $119.6B vs $117.9B expected.  The product lines are compared to expectations:  

• iPhone revenue: $69.7B vs $67.8B expected 
• Mac revenue: $7.8B vs $7.7B expected 
• iPad revenue: $7.0B vs $7.3B expected 
• Other Products revenue: $11.9B vs $11.6B expected 
• Services revenue: $23.1B vs $23.3B expected 
• Gross margin: 45.9% vs 45.3% expected 

The company did not provide guidance for the current qtr ending in Mar.  CFO Luca Maestri said that AAPL expected iPhone sales in the Mar qtr would be similar to last year’s $51.3B in revenue, after taking out $5B in sales attributed to outperformance a year ago as supply recovered from Covid shutdowns & caught up to demand.  Maestri said total company revenue would be similar to last year's $94.8B after taking out the $5B in iPhone sales.  He added that services would grow the same as in the Dec qtr, which was 11%.  AAPL reported 2% sales growth in the Dec qtr, breaking a streak of 4 straight qtrs with annual revenue declines.  Gross margin continues to rise, nearly breaking 46% in the Dec qtr.  AAPL reported $33.9B in net income during the qtr, up 13% from the same period last year.  The stock fell 41¢.

Apple revenue grows for the first time in a year, but China shows weakness

Amazon (AMZN) reported 4th-qtr results that sailed past estimates & gave strong guidance for the current qtr.  AMZN said first-qtr sales will be $138-143.5B, representing growth of 8-13%.  The forecast expected revenue of $142B.  It easily topped expectations for earnings, indicating that CEO Andy Jassy's efforts to rein in costs are paying off.  EPS surged to $1.00, compared to 3¢ a year earlier.  The company laid off 27K employees from late 2022 to mid-2023 & ended some of its more unproven bets.  It has continued to look for ways to trim expenses in other areas, such as its fulfillment business.  In Jan, it announced cuts in Prime Video, MGM Studios & Twitch, among other units.  CFO Brian Olsavsky said that the company will continue to take a careful approach on new investments, but that it doesn’t see 2024 “as a year of efficiency type thing.”  “We’re going to continue to invest in new things and new areas and things that are resonating with customers,” Olsavsky added.  “Where we can find efficiencies and do more with less, we’re going to do that as well.”  The stock jumped 11.90 (7%).

Amazon reports better-than-expected results, as revenue jumps 14%

Even though jobs created data was strong, it is really more of a mixed report.  That strength will encourage the Fed to be careful with the rate cuts.  And AAPL's report is showing it is a mature company with its best days of strong growth behind it.  The rise in interest rates is another negative to consider.

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