(Bloomberg) — The stock market extended this week’s gains as big tech rallied and a solid jobs report bolstered the outlook for corporate profits.
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Equities hit all-time highs, with the S&P 500 approaching 5,000 and the Nasdaq 100 up 1.7% on bullish outlooks from Meta Platforms Inc. and Amazon.com Inc. Economic optimism outweighed bets the Federal Reserve will be in no rush to cut rates. Treasury two-year yields jumped 16 basis points to 4.36%. The dollar climbed to its strongest since December.
“Today’s jobs report calls into question the narrative of a ‘soft landing’,” said David Donabedian at CIBC Private Wealth US. “The January jobs report was pretty dramatic, implying there may be ‘no landing.’ The economy is ripping ahead.”
To Neil Dutta at Renaissance Macro Research, strong growth in labor productivity means unit labor costs are under control — which is a good backdrop for company earnings. “It’s hard to get too bearish” with such economic resilience, said Bret Kenwell at eToro. Larry Tentarelli at Blue Chip Daily Trend Report sees the data as “a very bullish sign for the economy” — adding that “we are buyers on any short-term weakness in stocks.”
“Just as many were caught off guard by the recession that never appeared in 2023, there’s always the possibility that another year will go by without a recession,” said Chris Zaccarelli at Independent Advisor Alliance.
Nonfarm payrolls surged 353,000 last month following upward revisions to the prior two months. The unemployment rate held at 3.7%. Hourly wages accelerated from a month earlier, increasing by the most since March 2022. Separate data showed US consumer sentiment increased sharply.
While signs of a strong economy may continue to bode well for Corporate America, the data just reinforce the view that the Fed will delay the start of its rate cuts.
“I think we can officially kiss a March rate-cut goodbye — and more than likely a May,” said Alex McGrath at NorthEnd Private Wealth.
Fed Governor Michelle Bowman said she expects inflation to fall further with interest rates held at their current level — but noted it’s too soon for officials to consider cutting rates.
Swap contracts referencing the March Fed meeting date cut the odds of a quarter-point rate cut in half, to about 15% — while the May contract no longer fully priced in a cut, which it had for more than a month.
“A March rate cut now appears increasingly unlikely,” said Jason Pride at Glenmede. “The more likely trajectory is 2-3 cuts this year beginning around summer.”
Seema Shah at Principal Asset Management says that it wasn’t just a strong January for the labor market. It turns out that previous months were stronger than initially believed.
“The dramatic upside surprise to both jobs and wage growth means that a March rate cut must be off the table now, and a May cut is also now potentially on ice,” she noted.
Following Wednesday’s Fed decision, Chair Jerome Powell said that a cut is unlikely to come at the next gathering in March. He’ll will appear on CBS News’s 60 Minutes this Sunday to discuss inflation risks, expected rate cuts and the banking system, among other topics, the network said.
Powell’s pushback on the Fed being ready to cut rates in March now looks particularly “well timed,” according to Tiffany Wilding at Pacific Investment Management Co.
To Richard Flynn at Charles Schwab, Friday’s figures may be another factor delaying the Fed’s first rate cut closer to summer, but if the economy maintains its comfortable trajectory, that might not be a bad thing.
“What’s the hurry?” he asks.
The strong market gains remain at nearly unprecedented levels — with shifting expectations on the Fed outlook “unable to crack the momentum,” said Mark Hackett at Nationwide.
“Investors remaining on the sidelines are beginning to capitulate, which when paired with the return of share repurchases following earnings season, should act as a tailwind for markets,” Hackett noted.
Equities powered ahead Friday, led by a rally in megacaps that have driven the market surge from the bottom.
Meta, which dazzled shareholders with yet another impressive earnings report, soared 20% to a record. The surge added $197 billion to its market capitalization, the biggest single-session value addition, eclipsing the $190 billion gains made by Apple Inc. and Amazon.com Inc. in 2022.
The rush into technology stocks is resembling the dot-com era, reflecting an assumption that the economy will perform strongly despite tighter monetary policy, according to Bank of America Corp.’s Michael Hartnett.
He notes that 75% of investors expect a soft landing and 20% a no-landing scenario. Yet, while a soft landing should support a broader range of equities, the so-called Magnificent Seven accounted for 45% of the S&P 500’s return in January, reflecting a “leaning toward no landing/bubble,” he said.
In other corporate news, Apple Inc. trimmed its slide as investors looked past a deepening slump in its China business. Exxon Mobil Corp. and Chevron Corp. surpassed earnings forecasts as bigger-than-expected oil output from shale fields helped cushion the blow from weakening crude prices. A gauge of regional banks rebounded after a two-day rout.
Some of the main moves in markets:
Stocks
The S&P 500 rose 1.1% as of 4 p.m. New York time
The Nasdaq 100 rose 1.7%
The Dow Jones Industrial Average rose 0.3%
The MSCI World index rose 0.6%
Currencies
The Bloomberg Dollar Spot Index rose 0.6%
The euro fell 0.7% to $1.0793
The British pound fell 0.8% to $1.2637
The Japanese yen fell 1.3% to 148.30 per dollar
Cryptocurrencies
Bitcoin fell 0.3% to $42,945.79
Ether fell 0.3% to $2,297.85
Bonds
The yield on 10-year Treasuries advanced 14 basis points to 4.02%
Germany’s 10-year yield advanced nine basis points to 2.24%
Britain’s 10-year yield advanced 17 basis points to 3.92%
Commodities
West Texas Intermediate crude fell 2.3% to $72.14 a barrel
Spot gold fell 0.9% to $2,036.72 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Mackenzie, Subrat Patnaik and Carter Johnson.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
