Was last week one of significance? Based upon Friday’s jobs data and the profit performance of the Magnificent Seven that could now be called the Dynamic Dou, the answer is yes.
US employers added the most workers in a year, surpassing all estimates. Moreover, the prior two months were revised higher. Wages accelerated by the most since 2022. The unemployment rate slipped to 3.7% from 3.8%, the result of a flat labor participation rate at 62.5%.
The odds of a change in monetary policy at the March meeting declined to less than 5% from 21% just prior to the data release and the probability of a May reduction also declined dramatically. At the time of this writing, the market is now suggesting the year end overnight rate may be reduced by 120 bps.
Because of the surge in jobs, Bloomberg Economics is now suggesting first quarter GDP to increase by 1.5%, up from 0.6% a week earlier. It is dangerous to extrapolate one month of data for a myriad of reasons including the inevitable revisions, the statistics offers strong evidence the economy still has considerable momentum.
Last week four of the ‘Magnificent Seven” posted earnings, two of which underwhelmed and two of which overwhelmed. For the reporting season, the “Magnificent Seven” is 2 and 4.
The massive amount of funds that are in the Magnificent Seven (accounted for the majority of S & P 500’s 2023 gains and 65% of January’s gains) is unprecedented. Because of the “miss” from four of the companies and the market’s violent reaction to such disappointments, perhaps a more appropriate term for this august group is now the “Dynamic Dou.”
Rough estimates suggest the two over performers—AMZN and META have added about $280 billion to their capitalization. [Note: META’s $200 billion surge is the greatest increase in value in history]
The profit shortfalls in AAPL, MSFT, GOOG and TSLA have reduced their collective capitalization around $420 billion.
These sums are unfathomable, as is the combined loss in capitalization of the four companies that disappointed. The combined loss is greater than the GDP of 145 or 82% of the world’s countries. The net loss amongst the six companies is about $140 billion which is more than the GDP of 119 or 67% of the world’s countries.
Wow!
Friday the Treasury market sold off significantly. Two-year and 10-year Treasury yields surged over 25 and 20 bps from early morning lows.
What will happen this week?
The economic calendar is comprised of the ISM Services Index, trad data and inventories.
Last night the foreign markets were up. London was up 0.55%, Paris up 0.18% and Frankfurt up 0.29%. China was down 1.02%, Japan up 0.54% and Hang Seng down 0.15%.
Futures are nominally lower reflecting upon the realization that monetary policy may not change at the pace the market is expecting. The 10-year is off 18/32 to yield 4.10%.
