Stocks managed to eke out gains on Thursday, with traders sifting through mixed earnings reports ahead of the critical jobs data. Bonds trimmed their losses as Treasury Secretary Scott Bessent reiterated his belief in a lower path for 10-year Treasury yields under the Trump administration.
Amazon.com Inc. suffered a setback in after-hours trading, tumbling after the company projected profits below expectations, which signals that it is continuing to ramp up spending to support its artificial-intelligence services. On the other hand, Peloton Interactive Inc. delivered a bullish outlook, while Philip Morris International Inc. surged to a record high on strong sales of Zyn nicotine pouches. Ford Motor Co., however, dropped following a profit warning.
Key Earnings and Commentary
In his interview with Bloomberg, Bessent expressed that the Trump administration’s focus remains on policy measures that will reduce the 10-year Treasury yield rather than on the possibility of rate cuts by the Federal Reserve. Bessent also reaffirmed the administration’s commitment to a “strong dollar” policy under President Donald Trump.
Jobless Claims and Economic Data
Ahead of Friday’s payroll report, data on initial jobless claims showed a slight uptick, though the overall trend remained subdued. Additional reports indicated solid labor productivity growth. Wall Street will also be closely monitoring the revisions to the job growth figures, with economists predicting a notable adjustment, though likely not as substantial as initially estimated.
According to Chris Larkin at E*Trade from Morgan Stanley, “So far, this week’s numbers have highlighted a labor market that doesn’t appear to be doing much hiring or firing.” He added, “We’ll see if tomorrow’s monthly jobs report paints a similar picture. In the meantime, traders may be inclined to sit on their hands.”
Market Expectations and Volatility
Looking ahead to the monthly jobs report, the options market predicts the S&P 500 will move by 0.9% in either direction following the release of the data, according to Piper Sandler. This is in line with the average move observed on jobs days over the past year.
On Thursday, the S&P 500 rose 0.4%, the Nasdaq 100 gained 0.5%, and the Dow Jones Industrial Average slipped 0.3%. The Russell 2000, which tracks smaller companies, dropped 0.4%. Meanwhile, the “Magnificent Seven” megacaps index gained 0.7%.
Bond Market and Treasury Yields
The yield on 10-year Treasuries climbed by two basis points to 4.44%. The Bloomberg Dollar Spot Index remained largely unchanged, while the British pound fell by 0.5%. Bank of England Governor Andrew Bailey cautioned against reading too much into a surprise vote change from one official, which has sparked speculation that the BoE may consider rate cuts in the future.
Jobs Report Expectations
Tom Essaye of The Sevens Report noted the importance of the Friday jobs report. “If it’s Goldilocks, it’s going to help support the market amidst all this tariff and policy noise,” he said. “However, if it’s not Goldilocks, it’s going to add another headwind on risk assets and likely pressure stocks.”
This week, the Bureau of Labor Statistics is expected to release revisions to the January employment report, which historically have not attracted much attention. However, this year’s revisions are significant, with preliminary estimates suggesting a downward revision of 818,000 jobs—potentially the largest downward adjustment since 2009. Economists predict the final revision will range between 600,000 and 700,000 jobs, providing some relief compared to the initial estimate.
Fed Policy Outlook
The jobs data will be closely scrutinized by Federal Reserve officials. “As long as Friday’s jobs report shows that the economy added 170,000-200,000 jobs during the month, the market should largely absorb this number with little volatility,” said Gaurav Mallik of Pallas Capital Advisors. He added that a significantly stronger or weaker number could impact market expectations of future rate cuts.
Economists also anticipate that average hourly earnings data will be key, as any deviation from the stable 3.9%-4.0% range could have significant implications for inflation and Federal Reserve policy.
Investor Sentiment and Stock Market Outlook
Despite concerns among professional investors, retail traders have remained optimistic about U.S. stocks, particularly the so-called Magnificent Seven tech giants. According to JPMorgan’s Emma Wu, individual investor sentiment has reached a record high, surpassing the levels seen during the meme-stock mania of 2021.
Solita Marcelli at UBS Global Wealth Management expects continued positive performance for equities, with a year-end target of 6,600 for the S&P 500. Marcelli favors sectors such as technology, financials, and utilities for portfolio diversification.
Conclusion
As markets await the January jobs report and revisions to job growth, investors will likely remain cautious. The report is pivotal for future Fed policy decisions and could set the tone for market performance in the coming weeks.
