QQQ Up in Late Trading As Meta Soars, Apple Falls: Markets Wrap

(Bloomberg) -- The rally in big tech extended into late hours after bullish outlooks from two of the megacaps that have powered the stock surge from the bottom: Meta Platforms Inc. and Amazon.com Inc. Their gains outweighed a slide in Apple Inc. 

A $244 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) climbed, following an advance in regular trading. Meta gave a forecast for revenue growth that beat estimates while announcing it will pay its first-ever quarterly dividend of 50 cents a share and authorize an additional $50 billion in buybacks. Amazon reported strong sales and gave an operating income outlook that surpassed forecasts. Apple saw a deepening slump in China during the holiday quarter, even as total iPhone sales were stronger than expected. 

Stocks rebounded Thursday as Wall Street geared up for the US jobs report. Traders also kept an eye on regional banks as New York Community Bancorp slid again, while Citizens Financial Group Inc.’s chief said the issues leading the collapse of some lenders last year are largely in the past. Oil fell after a choppy session as traders assessed conflicting reports of progress on an agreement to pause the Israel-Hamas war and release hostages.

In the run-up to the government’s jobs figures, a report showed unemployment claims unexpectedly rose to a two-month high. Economists surveyed by Bloomberg forecast payrolls rose by about 185,000 in January following a December gain of 216,000. Separate data showed labor productivity advanced at a rapid pace while measure of US factory activity climbed to the highest in 15 months.

“Attention will turn to US job data,” said Fawad Razaqzada at City Index and Forex.com. “Still, traders are not letting go of the possibility of an earlier-than-expected rate cut. Those expectations could rise further if incoming US data from now on takes a bearish turn.”

The S&P 500 added over 1%, following its biggest drop on a Fed day since last March. US 10-year yields fell three basis points to 3.88%. The British pound rose after the Bank of England warned that price pressures could reemerge.

A survey conducted by 22V Research showed 50% of respondents believe employment data on Friday will be “risk-off,” 33% expect a “risk-on” reaction and 17% see it being mixed or negligible.

Economists are taking Powell’s words to heart and erasing the last of their forecasts for a March rate cut as they set their sights on May.

Goldman Sachs Group Inc., Bank of America Corp. and Barclays Plc — among the last Wall Street holdouts expecting the Fed to start lowering their benchmark rate as soon as March — have pushed back their forecasts for cuts after the conclusion of the central bank’s policy meeting Wednesday.

Swap contracts that predict the outcome of future Fed meetings are priced for about 150 basis points of easing this year, with the first move fully priced in for May. 

Meantime, institutional investors sold the most US equities for a single week in almost a decade — even as the S&P 500 hovered near all-time highs, according to Bank of America Corp. strategists led by Jill Carey Hall.

Last week, mutual funds, pension funds, insurance companies and banks offloaded the most equities since 2015, BofA said. The outflows came as the benchmark climbed 1.1%, with seven out of 11 sectors posting positive returns. The cohort diverged from private clients and hedge funds, which were net buyers of stocks and exchange-traded funds for the period.

If the US stock market goes down a little from here, it “could go down a lot.” That’s the view of Goldman Sachs Group Inc. tactical specialist Scott Rubner, who warned in a note to clients on Thursday that the “pain trade is now lower, not higher from here.”

“We have all-time high problems for the US equity market and the bar is simply too high in February,” Rubner wrote, pointing to elevated leverage levels, stretched positioning in futures and a drop in liquidity.

Investors should buy high-quality growth stocks, and opportunities go far beyond the megacap tech companies that propelled equities higher in 2023, according to Morgan Stanley’s Mike Wilson.

“We don’t think the trade is to go to the lower quality bucket,” Wilson told Bloomberg Television on Thursday. “That is a recession trade. We’re not in a recession.”

And a record boom in US investment-grade bond sales is set to spill into February as a comeback in corporate acquisitions meets insatiable investor demand for new debt. 

BofA expects companies to sell $160 billion to $170 billion of high-grade bonds this month, the most for any February on record. That would pile atop January’s nearly $190 billion deluge of fresh notes, especially as major firms line up for financing after posting their latest earnings.

Corporate Highlights:

• Qualcomm Inc., the world’s biggest seller of smartphone processors, is expecting a modest recovery for the industry in 2024, with phone shipments getting stronger but the market for internet-connected appliances remaining sluggish.
• Peloton Interactive Inc. said it expects another sales decline in the current quarter, defying Wall Street predictions for a return to growth.
• Wall Street banks including JPMorgan Chase & Co. and Bank of America Corp. are in talks to provide as much as $8 billion in financing for a buyout of DocuSign Inc. that values the company at around $13 billion, according to people with knowledge of the matter.
• The combative chief executive officer of Cleveland-Cliffs Inc. who lambasted United States Steel Corp.’s decision to sell itself to a Japanese steelmaker said his company’s offer is off the table.
• Royal Caribbean Cruises Ltd.’s gave initial profit guidance that was well ahead of expectations amid record demand.
• Merck & Co. forecast annual profit ahead of Wall Street views as sales of its cancer blockbuster Keytruda remained strong ahead of a looming patent expiration.
• Shell Plc kept up the pace of its share buybacks after a strong performance from its gas traders offset the impact of lower commodity prices in the fourth quarter.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.3% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.2%
• The Dow Jones Industrial Average rose 1%
• The MSCI World index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.5%
• The euro rose 0.5% to $1.0871
• The British pound rose 0.5% to $1.2746
• The Japanese yen rose 0.4% to 146.34 per dollar

Cryptocurrencies

• Bitcoin rose 1.3% to $42,994.41
• Ether rose 0.9% to $2,298.26

Bonds

• The yield on 10-year Treasuries declined three basis points to 3.88%
• Germany’s 10-year yield declined two basis points to 2.15%
• Britain’s 10-year yield declined five basis points to 3.75%

Commodities

• West Texas Intermediate crude fell 2.7% to $73.82 a barrel
• Spot gold rose 0.8% to $2,055.20 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Thyagaraju Adinarayan and Allison Nicole Smith.

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