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Amazon Shares Emerge from Behind the Clouds

The news shaping the markets today

New Zealand’s building permits rose 0.6% to 4,231 in December, lending support to the NZD/USD forex pair.


South Korea’s consumer prices rose 3.6% year-over-year in January, after a 3.7% rise in the prior month. Although the latest reading came in above the consensus estimates of 3.3% increase, the KRW/USD pair remained flat in forex trading this morning.


The Philippines reported a decline in its annual inflation rate to 3.0% in January, from 3.2% a month ago. The figure also came in better than the consensus estimates of 3.1%. Despite this, the PHP/USD forex pair remained under pressure.


US crude oil futures traded above the $90 per barrel mark for the first time since September 2014, with markets expecting a further tightening of supply.


Brazil’s composite PMI slipped to 50.9 in January, from a reading of 52 a month ago, sending the BRL/USD pair lower in forex trading this morning.

 

What’s happening: Shares of Amazon.com jumped in after-hours trading on Thursday, after the company reported strong earnings for the holiday quarter.

What happened: Amazon’s stock had been under pressure, down almost 19% year to date. Investors grabbed the opportunity of attractive entry points presented by the downturn, after Amazon reported an earnings beat.

The fourth-quarter earnings were driven by the company’s cloud-computing division. However, one of Amazon’s key metrics fell short of expectations.

How were the results: The Seattle, Washington-based company reported growth in both revenues and earnings but its top-line failed to meet market views.

  • Sales rose 9.4% to $137.4 billion, slightly short of market expectations of $137.6 billion.
  • Earnings came in at $14.3 billion, or $27.75 per share, almost double of the figure reported in the year-ago quarter.
  • Adjusted earnings were reported at $5.80 per share, beating the Street expectations of $3.67 per share.

Why it matters: In October last year, Amazon had announced plans to spend billions of dollars over the holiday season to ensure faster deliveries to customers, despite supply chain issues and labour shortages.

The company hired 140,000 workers and gave bonuses to ensure smoother deliveries. Although these initiatives resulted in a 13% increase in operating expenses to $133.95 million, Amazon’s online store sales declined by 1% to $66.1 billion, versus the strong gains recorded last year amid the pandemic.

Amazon’s earnings beat was driven by its cloud-computing and advertising businesses. Sales of Amazon Web Services surged 40% year-over-year to $17.8 billion, generating operating profits of $5.29 billion. Advertising revenues came in at $9.7 billion, up 32%.

Despite the decline in online store sales in the fourth quarter, Amazon said its sales from Black Friday to Cyber Monday hit a record high. The increased spend boosted the company’s confidence to increase the annual price of its Prime membership service, which has 200 million members around the world, by $20 to $139 per annum, representing the first rise since 2018. The monthly subscription charges will also be raised from $12.99 to $14.99.

For the quarter ending in March 2022, management projected revenues between $112 billion and $117 billion and operating profits of as much as $6 billion, versus consensus estimates of $120.5 billion in sales and earnings of around $6.06 billion.

How shares responded: Amazon’s shares climbed 14.3% to $3,173.00 in after-hours trading, following the release of quarterly results on Thursday. The stock had fallen 7.8% in regular trading on Thursday, as investors responded to weak earnings from Meta Platforms.

What to watch: Investors will keep an eye on Amazon’s online sales and the impact of the hike in Prime subscription fees.

The markets today

US stocks will be in focus today ahead of the all-important NFP report

 

Context: Wall Street fell sharply on Thursday, after Meta Platforms reported downbeat earnings for its fourth quarter. Markets now eagerly await the non-farm payrolls report.

Details: Tech stocks came under pressure with Facebook-parent Meta Platforms reporting disappointing earnings for the fourth quarter and issuing a weak forecast. Shares of Meta Platforms plummeted more than 26% on Thursday. Weak market sentiment also sent the shares of Twitter, Snap, Pinterest, and Amazon lower.

Although most of the S&P 500 sectors traded in the negative zone, stocks of consumer staples provided support to the overall market on Thursday. Almost half of the S&P 500 firms have reported earnings so far, with around 77% beating Street expectations.

The US reported a decline in initial jobless claims to 238,000 for the latest week, representing the lowest reading in three weeks. However, the ISM services PMI declined to 59.9 in January, from 62.3 in December, indicating the slowest growth in services activity since February 2021.

The Dow Jones shed 518.17 points to close at 35,111.16, while the S&P fell 2.44% to settle at 4,477.44 on Thursday. The Nasdaq 100 settled at 14,501.11, down 4.22%.

What to watch: Investors await the release of US NFP data, with expectations ranging from a decline of 400,000 to an increase of 250,000 in jobs for January. On Wednesday, the ADP reported a decline of 301,000 private jobs in January. However, the unemployment rate is expected to remain at 3.9%.

Other Markets: European trading indices closed lower on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.71%, 1.57%, 1.54% and 1.76%, respectively.

Support & resistances for today

Technical Levels News Sentiment

EUR/USD – 1.1448 and 1.1457



Negative


AUD/USD – 0.7128 and 0.7145


Negative


Nasdaq 100 – 14,447.87 and 14,586.98


Positive


Dow Jones – 35,035.51 and 35,201.14


Positive


Gold – 1,807.15 and 1,808.35 Positive

 

Market snapshot

What else to watch today

Germany’s factory orders and construction PMI, France’s industrial production, retail sales, payroll employment in private sector and construction PMI, Eurozone’s construction PMI and retail sales, Italy’s construction PMI, UK’s new car registrations and construction PMI, India’s foreign exchange reserves, Spain’s consumer confidence indicator, Mexico’s gross fixed investment, car production and auto exports, Canada’s unemployment rate, employment change and Ivey Purchasing Managers Index, as well as US Baker Hughes crude oil rigs.


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