By Geoffrey Smith
Investing.com -- Apple, Alphabet and Amazon all disappointed with their quarterly earnings in various ways, putting a chill on U.S. stocks. The Labor Department is set to report the slowest nonfarm job growth in nearly two years later, while the ISM will publish its non-manufacturing index for January. Gautam Adani catches a break from the ratings agencies, but still faces huge challenges in meeting debt repayments over the next couple of months, and oil prices are drifting into the weekend near their lowest levels of the year so far. Here's what you need to know in financial markets on Friday, 3rd February.
1. Big Tech’s limp quarter
Three Big Tech names all disappointed with their quarterly reports late on Thursday, stoking fears of a structural slowdown in growth for a select group of stocks that have been the market darlings of the last decade.
Apple (NASDAQ:AAPL) reported its first quarterly sales drop in over three years due to production problems in China at the end of 2022, while Alphabet (NASDAQ:GOOGL) also missed forecasts, due to Google’s ad revenue falling for only the second time in its history. Both companies’ numbers were hurt by the dollar’s strength, which depressed the value of their overseas sales.
Amazon (NASDAQ:AMZN) meanwhile topped expectations for profits but its stock still fell as the company reported slowing growth at its Cloud-hosting unit Amazon Web Services, which has been its most consistently profitable unit in recent years.
Apple stock was down 2.7% in premarket, Alphabet stock was down 4.7% and Amazon stock down 5.3%, all reversing the gains they had made on Thursday in response to Meta Platforms' (NASDAQ:META) upbeat report.
2. Jobs report set to show hiring slowdown
The U.S. releases its employment report for January, with nonfarm job creation set to slow for a fourth straight month to 185,000. If confirmed, that would be the smallest net addition in private jobs since January 2021.
ADP had reported an even sharper slowdown in private-sector hiring earlier in the week, with net job creation falling by more than half from November to only 106,000. However, the Labor Department’s monthly survey of vacancies and quitting suggested that the labor market is still tight, as did another nine-month low in initial jobless claims on Thursday.
Also of note later will be the Institute of Supply Management’s non-manufacturing index, days after a survey that painted a bleak outlook for the (albeit much smaller) manufacturing sector.
3. Tech chill to hit stocks at open; Nasdaq still on course for weekly gain
U.S. stocks are set to open lower later under the impact of the disappointment from Big Tech, but will essentially be treading water until the jobs report.
By 06:15 ET (11:15 GMT), Dow Jones futures were down 127 points, or 0.4%, while S&P 500 futures were down 0.9% and Nasdaq 100 futures were down 1.6%. The tech-heavy NASDAQ Composite is still on course to post a gain of over 3% for the week, with the lower interest rate outlook supporting stocks whose value is skewed further into the future.
Other stocks likely to be in focus later include Ford Motor (NYSE:F), whose big earnings miss and weak outlook were overlooked in the rush to analyze Big Tech earnings on Thursday. Ford is down 7.8% in premarket, while Qualcomm (NASDAQ:QCOM) is also lower after giving revenue guidance below consensus for the current quarter.
The peak week for earnings winds down with updates from Aon (NYSE:AON), Cigna (NYSE:CI), Regeneron (NASDAQ:REGN) and chemicals giant LyondellBasell (NYSE:LYB), among others.
4. Adani catches a break, for now
The rout in stocks and bonds issued by Gautam Adani’s network of companies eased as credit ratings agency Fitch said the turmoil caused by Hindenburg Research’s accusations of stock manipulation and fraud would have “no immediate impact” on its ratings.
Adani Enterprises' various subsidiaries face looming debt repayments that have become even more challenging since the billionaire canceled a $2.4 billion equity raise, despite having enough bids to cover the issue. Adani Enterprises’ current market price is so far below the marketing range that it would have been “immoral” to go ahead with the deal, Adani said in a video statement on social media.
The shares of Adani’s portfolio companies were also supported on Friday by tighter margin requirements imposed by India’s stock exchanges, making it more expensive to short the stocks. The rout has nonetheless wiped out over $100B in market value and caused serious embarrassment for Prime Minister Narendra Modi, whose development agenda Adani has enthusiastically pushed.
5. Oil drifts between Chinese strength and U.S. weakness
Crude oil prices are drifting into the weekend as the market continues to be torn between a weakening outlook for demand in the West and a rebound in China. China earlier announced it would cut exports of gasoline and other distillates this month, just as gasoline stocks in the U.S. are at their highest in nearly a year.
By 06:45 ET, U.S. crude futures were down less than 0.1% at $75.86 a barrel, while Brent was down 0.1% at $82.09 barrel.
Elsewhere, Russia’s Energy Minister downplayed suggestions that it will cut product exports in response to the EU and U.S. ban that comes into force next week, removing a marginal concern about supply in the near term, especially for diesel.