Ups and downs
Last week, markets swung wildly on economic news, as investors tried to interpret signals from the Fed about inflation and interest rates. This week, corporate earnings took the spotlight, and things looked steadier — for a while.
Volatility is back, in a big way. Meta dragged down the market yesterday following an earnings report that revealed several signs of trouble. Its decline erased more than $230 billion from its market cap, the biggest one-day loss, in dollar terms, in history.
But after the bell, Amazon reported bumper earnings, and the market turned around sharply in after-hours trading, with Amazon jumping nearly 20 percent at one point. (For those keeping score, that meant Meta’s Mark Zuckerberg lost $29 billion in net worth while Amazon’s Jeff Bezos gained $20 billion.) Tech stocks like Pinterest and Snap that were pulled down by Meta also turned around after reporting better-than-expected earnings: Snap’s shares rose more than 50 percent in after-hours trading.
The markets are flat today, but the jobs report could scramble everything again. Futures suggest a subdued open, for now, but attention has returned to the economy. This morning, the government will report how many jobs employers added in January, and like all of the other signals of late, it’s going to be messy. Forecasts from economists run from a gain of 250,000 jobs to a loss of 400,000, an unusually wide range. “It’s going to be a hot mess,” said Skanda Amarnath of Employ America, a research group.
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The Omicron coronavirus wave spiked mid-January, just as the government was collecting data for the report, but there is little evidence so far that the wave caused lasting economic damage.
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The unemployment rate could fall even if hiring slowed, because the spike in Covid cases may have led some to suspend job searches. The government considers someone unemployed only if they are actively looking for work.
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The first month of the year is typically hard to measure anyway. Employers release holiday workers, and the ebb and flow of the pandemic is likely to mess with normal seasonal adjustments.
What will it all mean for the Fed’s planned rate increases? Likely not much, said Vincent Reinhart, the chief economist at Dreyfus and Mellon and formerly of the Fed. That said, if the payroll number comes in weaker than expected, it may reduce the chances that the central bank raises interest rates by a more aggressive half-point, instead of an expected quarter-point, in March.