The equity futures, which were modestly positive heading into the initial jobless claims and U.S. productivity data, did not change much on the economic releases. Investors focus their attention on fourth-quarter corporate earnings.
This morning is light on economic news, but we did get a few reports of interest from the Labor Department. At 8:30 A.M. (EST), we learned that fourth-quarter productivity rose just 1.2%, which was down from the 2.1% increase recorded in the previous month. Unit labor cost rose 3.0% during the final three months of 2024. Those figures were not ideal for the Federal Reserve, as less productivity—and efficiency in the labor sector—could put upward pressure on the cost of producing goods and services and drive both producer (wholesale) and consumer prices higher. Conversely, initial unemployment claims for the week ending February 1st totaled 219,000. That figure was up 11,000 from the prior-week’s revised tally, but still indicative of a tight labor market. Tomorrow will bring the much-anticipated report on January employment and unemployment, which is expected to be closely watched by the Fed. The equity futures, which were modestly positive heading into the initial jobless claims and U.S. productivity data, did not change much on the economic releases.
Meantime, the news from Corporate America has had a big impact on the direction of trading the last few sessions. The technology sector—and the NASDAQ Composite—fell during the first half of yesterday’s session on disappointing quarterly results from technology giants Alphabet (GOOG) and Advanced Micro Devices (AMD) before rallying and finishing the session higher. It has been a volatile fortnight of trading for technology stocks, with concerns about spending on artificial intelligence (AI) arising following the DeepSeek news from China in late January. Some of the sting from that event eased recently after a number of the U.S. technology giants during their earnings conference calls said that they will continue to spend heavily on AI and its infrastructure buildout. On point, Alphabet said it had greater demand for AI than it could provide last quarter, and it is looking bring more capacity online, which will require AI-focused processing chips. This gave a boost the recently struggling shares of NVIDIA (NVDA), which rallied 5% during yesterday’s session and helped the NASDAQ Composite finish the session in positive territory. This morning, we learned that the House of Representatives will introduce a bill calling for DeepSeek to be banned from U.S. Government platforms.
Since the close of trading yesterday afternoon, we did receive a few notable quarterly reports from the corporate world. The headline release came from semiconductor company Qualcomm (QCOM), which posted strong quarterly results, including the biggest revenue in several years. The adjusted bottom-line figure of $3.41 a share also easily exceeded the consensus forecast of $2.96. Solid demand for smartphones powered the company’s chip processing business. The stock of Qualcomm is lower in pre-market action, as Wall Street focused on the intellectual property division, where licensing revenue was the only disappointing area, with segment revenues of $1.54 billion coming in below the consensus estimate. Even though the miss was narrow, it carries a little more weight, because the licensing segment has a high earnings-before-taxes margin of 75%.
ARM Holdings (ARM) also beat on both the top and bottom lines. The technology company noted a surge in royalties business. ARM stock is trading lower in extended hours on fiscal second-quarter guidance that was just in line with prior expectations. Perhaps, Wall Street was hoping for more upside. Ford (F) also beat both on the revenue and earnings lines, but the company’s electric vehicle (EV) business is still operating deep in the red. The automobile maker also lowered its free-cash flow guidance, which disappointed Wall Street and the shares in response are trading lower in premarket action. Investors should also note that the stock of Roblox (RBLX), which operates an online entertainment platform, is tumbling after the company reported its latest quarterly results.
Another focal point for Wall Street this week was news that the Trump Administration placed tariffs on Mexico, Canada, and China on February 1st. It ignited a selloff in the equity market on Monday, with fears that the tariffs could put additional upward pressure on goods coming into the United States and lead to a reacceleration in the pace of price growth. This would likely cause the Federal Reserve to be more hawkish with regard to monetary policy, which is not an ideal backdrop for equities. The major stock averages, though, retraced the selloff after the Trump Administration agreed to pause the tariffs on our North American neighbors for one month, while they continue negotiations on trade and immigration policies. The broader S&P 500 turned positive for the week during yesterday uneven, but ultimately productive session for stocks.
With the recent unsettling fiscal policy issues coming out of Washington D.C. and the AI news from China, we have seen some selective movement out of the higher-growth sectors. The possibility of a less-dovish monetary policy stance from the Federal Reserve this year also has put some pressure on the stocks of higher-growth companies. The small-cap Russell 2000 continues to underperform the other major equity averages.
Traders are increasing their positions in the defensive-oriented sectors, with greater interest in the healthcare, utilities, and defense groups. In the same vein, investors are again gobbling up gold, which is seen as protection against the negative impact of both geopolitical tensions, like we are witnessing on the international trade front, and inflation. The price of the precious metal is up nearly 10% since the start of 2025 and recently established a multiyear high price at just shy of $2,900 an ounce on The Commodity Exchange (COMEX). –William G. Ferguson
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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