S&P 500 Hits Historic High Amidst Jobs Report Uncertainty | Daily Market Analysis

Key events:

• USA - S&P Global Services PMI (Jan)
• USA - ISM Non-Manufacturing PMI (Jan)
• USA - ISM Non-Manufacturing Prices (Jan)
• Australia - RBA Interest Rate Decision (Feb)

On Friday, the S&P 500 and Dow achieved record levels, driven by Meta's impressive gains that bolstered optimism in the big tech sector. Despite a robust jobs report causing uncertainty in the Federal Reserve's rate-cut projections, the S&P 500 surged 1.3% to reach a historic closing high of 4,957.75. Simultaneously, the Dow Jones Industrial Average climbed 134 points, or 0.4%, attaining a record high of 38,654.42, while the NASDAQ Composite experienced a 1.7% increase.

Meta Platforms (NASDAQ: META) contributed significantly to these gains, with its stock rising by 20%. The tech giant opted not to issue its first dividend and unveiled an additional $50 billion share buybacks. This move followed a quarterly profit surge at the Facebook parent, tripling from the previous year.

Conversely, Apple (NASDAQ: AAPL) faced challenges as its iPhone sales fell short of Wall Street expectations, primarily due to weakness in China. China accounts for approximately 20% of iPhone sales. While facing competition from Huawei and geopolitical headwinds, there remains optimism that users of older iPhone models in China will upgrade their devices, according to Wedbush.

Intel Corporation (NASDAQ: INTC), however, experienced a decline of over 2%, attributed to reports of the chipmaker postponing the construction of its semiconductor factory in Ohio. This decision was influenced by market challenges and a slower-than-expected disbursement of government grants to support chip plant construction.

Despite these market dynamics, the US economy demonstrated robust job growth in January, exceeding expectations by adding 353,000 nonfarm payrolls. This surge in employment, coupled with a slight unexpected dip in the participation rate, resulted in a 0.6% increase in average hourly earnings, surpassing economists' predictions for a 0.3% decline. The stronger-than-expected wage growth has introduced uncertainty into the outlook for rate cuts, with some economists now speculating a potential delay in the first rate cut due to concerns about inflationary pressures.

The Australian Dollar is under selling pressure on Monday, influenced by robust job data from the United States. The resulting surge in the US Dollar has weighed on the AUD/USD pair. Additionally, the S&P/ASX 200 Index, retracting from last week's record high, particularly in the miners and energy sectors, has added further strain on the Australian Dollar.

The Trade Balance report for January, released by the Australian Bureau of Statistics, signaled a decrease, with the figure standing at 10,959M, compared to the revised December figure of 11,764M. On a brighter note, positive shifts were observed in economic indicators, as the Judo Bank Composite Purchasing Managers Index rose to 49 in January from the previous 48.1. Additionally, the Services PMI demonstrated improvement, climbing to 49.1 from the previous 47.9.

Tuesday is marked for the Reserve Bank of Australia's interest rate decision. According to a Reuters Poll, analysts unanimously anticipate the RBA to maintain the cash rate at 4.35%. Investors are keenly awaiting RBA Governor Michele Bullock's speech on the monetary policy outlook for deeper insights into the central bank's position.

During the Asian session on Monday, the Japanese Yen reached a new year-to-date low against the US Dollar. Despite this, the selling pressure was not sustained following the Bank of Japan's hawkish tilt. Ongoing geopolitical concerns in the Middle East and the persistent weakness in the Chinese economy continue to curb investor enthusiasm for riskier assets, reinforcing the JPY's status as a relative safe haven. The US Dollar, easing from its peak since December 11, further restricts the upside for the USD/JPY pair.

GBP/USD is in a declining trend for the second consecutive session, hovering around 1.2610 during Asian trading hours on Monday. The Pound Sterling faces challenges as the US Dollar reaches an eight-week high.

Examining the US economic calendar, the week appears quieter after the bustling activities of the January jobs report and the Fed's initial meeting of the year. Monday's spotlight is on the ISM services PMI for January, with economists anticipating a rise in sector activity. Later in the week, the Labor Department is set to release the weekly report on initial jobless claims on Thursday.

Investors will be attentive to insights from various Fed officials throughout the week, including Atlanta Fed President Raphael Bostic, Cleveland Fed President Loretta Mester, Governor Adriana Kugler, Richmond Fed President Thomas Barkin, and Governor Michelle Bowman. Ahead of these, Fed Chair Jerome Powell is slated to discuss the economy and inflation risks in an interview on CBS's 60 Minutes on Sunday night.