Stock market today: Dow slips as jobs gains deliver big blow to Fed pause bets

By Yasin Ebrahim

Investing.com -- The Dow closed lower Friday as pressure from Amazon and Google soured sentiment on tech just as a blowout jobs report dented bets on a sooner Federal Reserve pause on rate hikes.

The Dow Jones Industrial Average fell 0.38%, or 127 points, and the Nasdaq was down 1.58%. The S&P 500 fell 1.1%, though ended the week up about 1.6%.

Data on Friday showed the U.S. economy created 517,000 jobs last month, well above economists’ estimates of 185,000. Average hourly earnings slowed to 4.4% in January from the prior month, but were above estimates of 4.3%. The unemployment rate fell to 3.4%, the lowest level since May 1969.

The strong jobs report forced some on Wall Street to revise their calls for the Fed pause next month.

“We now make another 25bp hike at the March FOMC our base case, raising the peak fed funds rate this cycle to 4.875%, with more upside risk if labor market data continue to move from strength to strength,” Morgan Stanley, ditching its estimate for a Fed pause next month.

Treasury yields jumped as investors priced in a more hawkish Fed, with expectations for a March hike nearing fully priced in and the May hike jumping to 57.5% from 30% on Wednesday, Investing.com’s Fed Rate Monitor Tool showed.

Consumer stocks led the broader market lower, pressured by a 8% slump in Amazon.com Inc (NASDAQ:AMZN) after the e-commerce giant reported fourth quarter earnings that missed on the bottom line and softer guidance for Q1 amid growth in its cloud business.

Some on Wall Street, however, pointed to improving margins in Amazon’s e-commerce businesses that also likely receive added boost from recent job cuts as reason for optimism.

“Ecommerce margins improved quarter on quarter and should benefit from 1Q headcount reductions,” Oppenheimer said in a note as it lifted its price target on the stock to $125 from $130 a share. “Online stores likely to benefit from a stronger second half on easier comps,” it added.

In tech, meanwhile, Apple Inc (NASDAQ:AAPL) rose about 2% shrugging off weaker-than-expected quarterly results were overshadowed by positive remarks chief executive Tim Cook and signs that growth accelerated in China post-lockdown.

“Gross margins are now expected to be 44% at the midpoint and would be the highest GM in over a decade as Apple's ability to further control its ecosystem through its chip production and tactical negotiations with suppliers gives the stalwart a major margin tailwind,” Wedbush said, lifting its price target on Apple to $180 from $175 a share.

Alphabet Inc (NASDAQ:GOOGL), meanwhile, fell more than 2% after its quarterly results missed Wall Street estimates, weighed down by weakness in advertising as the softer economic backdrop dented advertising spend.

In other earnings news, Starbucks (NASDAQ:SBUX) delivered quarterly results that fell short of estimates on the both the top and bottom lines as the coffee chain’s sales in China were hurt by the Covid surge following the country’s reopening.

Ford Motor (NYSE:F) also missed fourth-quarter earnings and revenue estimates as performance was dented by “execution issues” that weighed on sales. Its shares closed more than 7% lower.

In other news, Nordstrom (NYSE:JWN) surged nearly 25% as activist interest activist investor Ryan Cohen reportedly took a stake in the retailer and is eyeing board changes.