Non Farm Payroll Stops AMZN From Falling ?
On Thu, 06 Feb 2025 jobless claims report did nothing to boost US market rally momentum.
In fact it caused traders to be a little wary, ahead of the ultimate Non Farm payroll (NFP) report due on Fri, 07 Feb 2025.
This has been the case since US slipped into a technical recession from February 2020.
By the time market called it a day: (see above)
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DJIA : -0.28% (-125.65 to 44,747.63). Weighed down by $Honeywell(HON)$, falling -5.6% after announcing it would split into 3 independent companies, focusing on (a) aerospace, (b) automation and (c) advanced materials.
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S&P 500 : +0.36% (+22.09 to 6,083.57).
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Nasdaq : +0.51% (+99.66 to 19,791.99).
All 3 major averages are on track to finish the week with modest gains
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The Dow is lagging, with a week-to-date climb of about +0.5% gain only.
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S&P 500 is on pace for a +0.7% advance.
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The Nasdaq is tracking for a +0.8% jump for the same period.
US Economic Reports
US economic reports continue to roll off as scheduled.
ISM services pmi
(1) ISM Services Purchasing Manager Index.
Thu, 06 Feb 2025 saw the ISM’s Services purchasing managers’ index (PMI) report published. (see below)
The Institute of Supply Management (ISM) reported that services PMI for January 2025 came in at 52.8%, missing consensus estimate of 54.3% by -1.50%.
At the same time, metric for December was revised marginally downward to 54% from 54.1% reported on 07 Jan 2025.
Note: reading above 50% indicates expansion of services activities.
US weekly jobless claims for week ending 01 Feb 2025
(2) US Weekly Jobless claims.
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Weekly jobless claims increased moderately by 11,000 to 219,000, for week ending 01 Feb 2025.
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Latest actuals came in “higher” than economists’ forecast of 213,000, polled by Reuters.
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This is consistent with steadily easing labour market conditions, though opportunities for those out of work are becoming scarce amid tepid hiring.
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Jobless claims’ “4-week moving average” - a metric that helps smooth out fluctuations, ticked up to 216,750, only the highest in a month.
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Claims report also revealed, number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 36,000 to a seasonally adjusted 1.886 million during week ending 25 Jan 2025.
US labour market resilience remains as the driving force behind US economic expansion.
It has given the Fed room to pause interest rate cuts while they continue to assess the impact of (a) fiscal, (b) trade and (c) immigration - policies of President Trump's administration, which economists view as inflationary.
Non farm payroll forecast (red) for January 2025
Non Farm Payroll Forecast.
US Bureau of Labour Statistics (BLS) will publish the important Nonfarm Payrolls (NFP) data for January 2025 on Friday at 13:30 GMT.
Economists expect NFP to increase by 170,000 jobs in January 2025, following a 256,000-job surge in December 2024. (see above)
Unemployment Rate (UE) is likely to remain status quo at 4.1% in the same period.
Amid lingering inflationary concerns under Trump’s presidency, the January jobs report will be scrutinized to gauge (a) US central bank’s interest rate outlook and (b) the Dollar performance in the near term.
On Thursday, 6 of 7 Magnificent 7 stocks chalked varying gains, from +0.0052% (GOOG) to 3.08% (NVDA). (see above)
The exception was TSLA. It fell -1.02% after reports of a -59% sales crash in Germany.
After market closed, $Amazon.com(AMZN)$ was the 6th magnificent 7 stocks to report its Q4 earnings.
AMZN Q4 Earnings.
The multinational technology company handed in a better-than-expected earnings and revenue for Q4 2024.
According to LSEG:
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Earnings per share: $1.86 vs $1.49 expected.
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Revenue: $187.79 billion vs $187.30 billion expected.
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Net income: came in at $20.0 billion, a+88.67% YoY gain from $10.6 billion (Q4 2023).
In short, Amazon met both its top and bottom lines.
In addition, Wall Street was also zooming into key revenue numbers: (see below)
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Amazon Web Services (AWS): $28.79 billion vs $28.8 billion, according to StreetAccount
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Advertising: $17.3 billion vs $17.4 billion, according to StreetAccount
Despite an overall “stellar” earnings report, AMZN tumbled in late hours trading.
Traders took issue with Amazon’s (i) first-quarter 2025 forecast that missed estimates and (ii) larger-than-expected capital expenditure plan.
Current Quarter Guidance.
This was due to AMZN’s “weaker” outlook and guidance for current quarter:
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Revenue : forecast sales between $151 and $155.5 billion, below analyst consensus of $158.58 billion.
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Amazon expects revenue growth of only 5% to 9% in the first quarter.
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It is at the low end of the range, marking the slowest growth on record since AMZN went public in 1997.
Amazon has attempted to explain the guidance “anticipates an unusually large, unfavorable impact from foreign exchange rates”, that will impact amounts of $2.1 billion, or 1.5%.
Larger Than Life Capital Expenditure.
Amazon spent $27.8 billion on capital expenditures this quarter, up from $14.6 billion last year.
They're investing heavily in data centers and equipment like Nvidia processors for their AI products.
This is in response to growing competition in generative AI from the likes of OpenAI (ChatGPT), Google (Gemini), Microsoft (Copilot), and Anthropic (where Amazon is an investor).
Amazon CFO Brian Olsavsky planned to increase capital expenditures to $100 billion in 2025, from about $83 billion in 2024, with increased spending mainly for AWS, to meet demand for their AI services, and for tech infrastructure in North America and internationally.
CEO Jassy emphasized the company's AI investments in the earnings release, including new AI models called Nova and AMZN’s own Trainium chips.
Based on available information so far, above is Magnificent 7’s allocated budget for artificial intelligence (AI) in 2025.
“These are substantial enablers in this emerging technology environment.
Can’t wait to see which Mag 7 company / companies will successfully harness AI to its fullest potentials in the weeks, months and years ahead.
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