Coffee With Greta: Traders Wait For The Fed

DJIA Futures: -136 (-0.4%)

SPX Futures: -9 (-0.2%)

NASDAQ Futures: -7 (-0.1%)

Good morning friends!

Futures are lower as traders wait for the Fed.

Let’s get right to it!

Private Job Growth Slows Sharply

Private sector job growth slowed more than expected at the beginning of 2023. 

Payroll firm ADP reported U.S. private employers added 106,000 jobs in January. 

That was lower than economists’ expectations for 190,000 and down from 253,000 in December.

The hospitality industry continued to see the largest gains, adding 95,000 workers. 

Financial activities sector added 30,000, manufacturing added 23,000, and education and health services added 12,000. 

But the trade, transportation, and utilities sector lost 41,000 jobs, construction lost 24,000, and natural resources and mining fell by 3,000. 

Pay rose 7.3% year over year, relatively unchanged from December. 

But ADP’s chief economist said severe weather impacted the numbers and job growth may not have been as weak as this report indicates. 

The Fed has been looking for the labor market to weaken as it hikes interest rates to slow inflation. 

Today’s data comes ahead of the official January jobs report on Friday which is expected to show the U.S. economy added 187,000 jobs and the unemployment rate ticked higher to 3.6%.

AMD Tops Q4 Estimates

Advanced Micro Devices (AMD) shares are  up 3.2% ahead of the open after beating Q4 expectations on the top and bottom line. 

Here’s how the chipmaker’s results compared to analysts’ estimates: 

• Adjusted EPS: $0.69 vs $0.67 expected
• Revenue: $5.6 billion vs $5.5 billion expected

The company continued to see slowing sales of its PC chips and graphics processors.

But data center sales jumped 42% year over year while its embedded segment saw sales skyrocket 1,868% due to its purchase of chip manufacturer Xilinx.

AMD forecast $5.3 billion in Q1 sales, which would be a 10% decline year over year and missed analysts’ estimate of $5.47 billion. 

Snap Tumbles On Revenue Miss

Snap (SNAP) shares are falling 13% in premarket trade after its Q4 sales came up short. 

Here’s how the social media giant’s results compared to analysts’ expectations: 

• Adjusted EPS: $0.14 vs $0.11 expected
• Revenue: $1.30 billion vs $1.31 billion expected
• Global daily active users: 375 million vs 375.3 million expected
• Average revenue per user: $3.47 vs $3.49 expected

In a letter to investors, Snap called 2022 a “challenging year” marked by “macroeconomic headwinds, platform policy changes, and increased competition.”

Sales rose 12% for the full year to $4.6 billion but the company declined to provide guidance for Q1. 

Snap said, “On the monetization side, we anticipate that the operating environment will remain challenging, as we expect the headwinds we have faced over the past year to persist throughout Q1.”

Peloton Rises On Strong Fiscal Q2 Revenue, Narrowing Loss

Peloton (PTON) shares are up 6.1% ahead of the open after reporting better-than-expected fiscal Q2 revenue. 

Here’s how the fitness equipment maker’s results compared to analysts’ expectations:

• Loss per share: $0.98 vs $0.64 expected
• Revenue: $792.7 million vs $710 million expected

Although that loss was steeper than estimates, it was down from a loss of $1.39 per share a year earlier. 

It was the eighth quarterly loss in a row for the company.

Peloton’s CEO called the results a possible “turning point” for the business as he focuses on an aggressive turnaround strategy.

The company’s subscription revenue was higher than sales of its equipment for the third quarter in a row. 

Peloton’s connected fitness product sales dropped 52% year over year while subscription revenue jumped 22%.

The company forecast sales will fall in the current quarter to a range of $690 million to $715 million.

That was in line with analysts’ estimates for $692.1 million.

Mortgage Demand Pulls Back

Mortgage demand fell last week despite rates continuing to fall. 

The Mortgage Bankers Association reported total application volume fell 9% weekly. 

Purchase applications fell 10% weekly and were 41% lower year over year. 

Refinance applications dropped 7% weekly and 80% annually. 

The drop came despite the average 30-year fixed contract rate falling to 6.19% from 6.2%. 

MBA’s chief economist said buyers are still struggling with tight supply but activity is expected to increase soon. 

He said, “Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth.”

Coming Up: JOLTS and Fed Decision

The Labor Department releases its December job openings and labor turnover survey (JOLTS) at 10:00 a.m. ET. 

That survey is expected to show the number of vacant jobs fell to 10.3 million at the end of 2022 from 10.5 million in November. 

The Fed then releases its first rate decision of the year at 2:00 p.m. ET followed by Chairman Jerome Powell’s press conference at 2:30. 

CME Group’s FedWatch Tool shows over 99% of traders expect the bank to raise the federal funds rate by 25 basis points. 

Key Earnings After The Close

Here’s a look at the companies set to report earnings after the close today:

• Meta Platforms (META)

In Case You Missed It

• Consumer confidence fell unexpectedly at the beginning of the year as Americans grew wearier of an impending recession. The Conference Board’s consumer confidence index fell to 107.1 in January from a revised 109 in December. That missed economists’ expectations for an increase to 109.5. The drop was mainly due to a decline in the expectations index which fell to 77.8 from 83.4. Any reading below 80 typically signals a recession within the next year.
• PayPal (PYPL) announced plans to lay off 2,000 employees on Tuesday. Those cuts represent about 7% of the company’s workforce. PayPal’s president and CEO said the company is working to address the “challenging macroeconomic environment.”