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“Nobody goes there anymore. It’s too crowded.” – Yogi Berra

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup.  Start a two-week trial to Bespoke Premium to view the full report.  

If Yogi Berra were alive today, we could only imagine how he would describe Meta Platforms (META). While the company owns the apps that everybody loves to hate, not only are most people on it, but thanks to AI-enhanced algorithms, they’re spending more time on them than ever.  The result is a record high in META’s stock price and an overnight increase in its market cap of $170 billion. According to Bloomberg, that would rank as the fifth largest one-day gain in market cap for a single company on record.  Can you imagine where META would be if people “liked” the product?

Turning to the rest of the market, futures were sharply higher on the back of earnings from META and (AMZN) overnight, while a 2.5% decline in Apple (AAPL) keeps the gains in check. All in, the S&P 500 was indicated to open up by about 0.7% while the Nasdaq was up over 1% as each index erased its declines from the mid-week “Fed-induced” decline.

Almost lost in the shuffle of all the earnings news after the close yesterday and this morning is this morning’s employment report for January.  If you thought the results relative to expectations of AMZN and META knocked the cover off the ball, you may want to sit down for this one. Non-farm payrolls showed a monster increase of 353K relative to forecasts for a gain of just 185K, and the last two months were also revised higher.  Average hourly earnings doubled expectations (0.6% vs 0.3%), and the Unemployment Rate came in at 3.7% versus 3.8%. The only negative in the report was average hourly earnings which dropped to 34.1 hours from 34.3 last month. This was a very strong report and will put the idea of good news being good news for the market to the test.  The immediate reaction in equity futures was a decline as the Dow dipped into the red, while the gains in the S&P 500 and the Nasdaq were more than cut in half.

META’s 15%+ pre-market rally has the stock on pace to have its fifth-best day in reaction to earnings since the IPO in 2012. It will also be the ninth time that the stock rallied at least 10% on an earnings reaction day. A big question for traders is whether the stock tends to build on these gains after gapping up so much or does it give back some of the gains.

The chart below compares the relationship between META’s performance on its earnings reaction day versus its performance from that day up until its next earnings report. When the stock was down on its earnings reaction day or up less than 10% (non-shaded area in chart), its median performance up until its next earnings report was a gain of 5.8% compared to the 10.2% forward performance following the eight days when the stock rallied more than 10% on its earnings reaction day. History is never guaranteed to repeat itself, but when META rallied by double-digit percentages in reaction to earnings it tended to keep the rally going moving forward.

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