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Yesterday’s mixed markets were based on weak earnings and skepticism of AI spending
- Markets show mixed performance as investors digest jobs data and corporate earnings reports.
- Amazon’s AI spending rattles investors after disappointing earnings, while Nvidia’s report gains attention.
- Nike struggles to regain market position, Meta Platforms’ stock rally could spur profit-taking.
Markets were mixed yesterday, showing little overall change as investors awaited key economic data. The S&P 500 posted a modest gain of 0.4%, while the Nasdaq Composite moved higher by 0.5%. Conversely, the Russell 2000 and Dow Jones Industrial Average both closed lower, each declining by 0.3%.
Trading volume has remained subdued throughout the week as market participants anticipated the release of the latest employment figures. Analysts had projected the addition of 160,000 new jobs and an unemployment rate of 4.1%, according to Bloomberg. However, the actual data revealed the creation of 143,000 new jobs and an unemployment rate of 4%.
Despite the lower-than-expected job growth, the CME Fed Watch Tool indicated the probability of the Federal Reserve maintaining current interest rates at their March meeting remained steady at 85.5% following the report.
U.S. tech companies boost AI spending
In corporate news, Amazon (AMZN) released its fourth-quarter earnings after yesterday’s market close, which fell short of expectations. The company missed revenue targets for its cloud division and provided a forecast for lower-than-anticipated sales and operating income. Continuing a trend seen throughout this earnings season, the company announced plans to significantly increase spending on artificial intelligence. As a result, Amazon shares were down 3% in premarket trading.
The surge in AI-related expenditures has unsettled investors, primarily because of the lack of clear, quantifiable returns on these investments. While there is broad consensus AI spending will yield substantial benefits in the long run, the absence of immediate, measurable outcomes has left analysts cautious. With many companies ramping up AI investments, attention is turning to the upcoming Nvidia (NVDA) earnings report later this month because it will provide insight into the demand for AI technology. Notably, Nvidia shares are down 4% year-to-date.
Additional observations
Another stock in the news is Nike (NKE). The athletic footwear and apparel giant has seen its stock price decline approximately 30% from last year’s peak of over $107. A recent investor meeting failed to reassure analysts, raising concerns about the company’s ability to regain its former market dominance. In premarket trading, its shares were down 0.4%.
Today’s weaker-than-expected job numbers will likely require further analysis, especially considering the upward revisions to November and December figures, which added 100,000 jobs to the previously reported totals.
Additionally, employment trends will be worth monitoring in light of the Trump administration’s efforts to reduce the size of the federal government. It remains uncertain how these changes will affect the broader labor market, particularly if many employees choose retirement over job transitions.
Lastly, attention is on Meta Platforms (META), whose shares have risen for 14 consecutive days—an unusual streak that may prompt profit-taking ahead of the weekend.
As always, maintaining a focus on long-term investment strategies and goals is advisable amidst these market developments.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG’s FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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