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WSJ Your Money Briefing
Fed Turbo-Charges Stocks
00:08:25
Stocks were mixed Friday; but the Fed's plan to be patient with rate hikes made it a strong week for the markets, which also had a great January. The Wall Street Journal's Corrie Driebusch says investors are looking ahead to U.S.-China trade talks.
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Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 countries operate like a local everywhere. Visit deel.com WSJ.
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With your money briefing. I'm Charlie Turner in New York for the Wall Street Journal. The major US Averages ended mixed Friday, capping a strong week running down the numbers. The Dow Jones Industrial the industrial average closed up 64 points at 25,063. The Nasdaq composite fell 17 points, while the S&P 500 ended 2 points higher. For the week, the S and P rose 1.6%, the Dow was up 1.3% and the Nasdaq booked a gain of 1.4%. We're joined by Cory Driebush, markets reporter for the Wall Street Journal. Cory, as I said, a mixed day for Friday. A great number on January. Job growth 304,000 on the 1 hand. On the other hand, Amazon outlook was weak.
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C
Yes, it's funny, a lot of companies in earnings season this quarter have been just barely beating, but beating very lowered expectations. But the market has been watching for guidance and Amazon's kind of cautioned in their report that spending is likely to increase this year and also that some government restrictions in India could weaken its revenue there. So that coupled with I believe that its revenue growth has just been slowing even though it's still growing, has got some investors a little worried. They sold off that stock pretty brutally today.
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Do earnings generally have investors in an upbeat mood or are they still worried about it? It seems like earnings have had a fairly strong quarter.
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C
Yeah, I think it's important to note that they're better than feared. Earnings expectations had come down so much in recent months, but also recent weeks just leading up to the start of earnings season, there was very lowered expectations. They didn't need to do much to beat them. It's not that we're having the super strong. One thing to note that companies in The S&P 500 are on track with about half of the companies reported to post year over year earnings growth of 12%, which on the one hand is the fifth straight quarter of double digit earnings growth. On the other hand, it's the first time that growth has fallen below 20% since the fourth quarter of 2017. It's sort of good news, but not great news.
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But it was a positive week and the catalyst was the Fed's policy statement, Chairman Jerome Powell's press conference, both of which signaled that interest rate hikes would be coming to an end.
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C
Yes, so we saw quite a few good News items. We saw this strong jobs report on Friday which had a lot of jobs were added along with a tick up in wages that supported this newfound optimism that has kind of washed over the stock market just in January and now this one day of February, as many of our listeners will remember in December there were quite a few fears that there was an economic slowdown going down going on, that maybe we could be heading closer to a recession and that the Federal Reserve was just barreling ahead with so many interest rate raises they were out of touch, et cetera, et cetera. Well, how much one month has changed? All the data shows the economy may be slowing, but it's still growing. And the Fed has really come out very strongly to say they're not going to be rushing to raise interest rates. And we saw that this week with Chairman Powell's remarks that they're going to be patient. And it was very comforting to stock market investors and traders.
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B
How do you view the Fed's statement that the central bank would be patient with future rate hikes followed by a strong jobs report? Do observers think that the Fed might have been a bit quick on the draw signaling an end to rate hikes? Is there any of that in there?
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C
Yeah, I mean his comments this week said the case for raising rates has weakened somewhat, which as you mentioned, that juxtaposition with this big jobs report is maybe, maybe did the Fed paid too much attention to the stock market versus the data. And that's been a common criticism of the Fed going back the past decade since the financial crisis. But it's important to note and talking to a lot of economists and analysts and strategists is that even as January's employment numbers look good, the Labor Department did revise its figures for December lower, it lowered payroll gains and also the unemployment rate ticked up and the labor force participation remains only modestly above multi decade lows. So I mean it's not this huge home run that we saw in the jobs report.
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B
Still, January has been a home run. We'd be remiss in not mentioning that January was the best month overall for both the Dow and S and P in more than three years. Both of them were up more than 7%. And I guess that was in large part fueled by the Fed.
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C
Yes, in large part fueled by The Fed's pretty much 180 from the interpretation of the or the interpretation of the Fed completely reversing.
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B
What do investors view as risks going forward? I mean are we talking about US China, trade talks or the possibility of
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C
another government shutdown Definitely every person I spoke with on Friday mentioned the US China trade talks and many said that that was their number one concern going forward. And that has to do with if anything is going to start really crimping US Companies and their revenues. It's going to be a continued tariff battle between the two countries.
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B
Do you get the sense that there's general pessimism that Xi Jinping and President Trump can reach a deal, or is that too soon to tell?
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C
I think it's a little soon to tell. I think that the market was so focused on the Fed and this jobs report that now we're going to see next week a lot more focusing on these talks. And I believe President Trump late Friday mentioned that he was going to update the country with how the talks are going during the State of the Union next week. So we'll have that to look forward.
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B
And also finally, you know, the government shut down. That ended. But there's, you know, the possibility of another one in two weeks. President Trump has been kind of downbeat for the prospects of reaching a new deal.
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C
Yeah, I think that many people in the market are a little too maybe blase about the shutdown is over. But it was really just the canvas kicked. And I think that we aren't going to see that really start weighing on shares again until maybe in a couple weeks when it's back on the table. Although to be fair, it never really weighed on shares. There was that lingering worry and it did impact certain corners of the market, the IPO market being one of the most prominent ones that was impacted. But stocks still grinded higher.
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B
Wall Street Journal markets reporter Cory Driebush, thanks a lot.
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C
Thank you so much.
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B
It will be another busy week for quarterly earnings reports. One of them comes right at the start of the week. Google parent Alphabet weighs in on Monday. Also during the week, social media giants Snap and Twitter release profit numbers in media and entertainment. We'll hear from Walt Disney, Viacom, the New York Times and 21st Century Fox, which shares common ownership with Wall Street Journal parent News Corp. Carmakers General Motors and Fiat Chrysler are scheduled to reveal their latest numbers regarding all things food related. We'll get earnings from Chipotle, Yum Brands, Tyson Foods, Dunkin and Kellogg. We'll also check out the latest quarterly profit figures from Mattel, hasBR, Electronic Arts, Take Two Interactive, Ralph Lauren and T Mobile. Speaking of carmakers, they'll all report their January sales numbers in the coming week. Other economic reports include factory orders, services, Activity, international trade and weekly jobless claims. Fed Chairman Jerome Powell is scheduled to speak Wednesday evening. And we'll also hear in the new week from Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard. And that's your money briefing. I'm Charlie Turner in New York for the Wall Street Journal.
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