US Close: Stocks tumble after Meta’s big miss, Jobless Claims and ISM Services

The tech rebound is officially over after both Facebook owner’s disastrous earnings and a couple major central bank decisions paved the way for borrowing costs to continue to surge. The ECB’s hawkish shift opens the door for tightening this summer.  The BOE had four dissenters that wanted to double today’s rate increase.  Technology stocks are going to struggle as confidence fades that the middle-of-pack companies will be able to navigate persistently high inflation, surging borrowing costs, and intensifying margin pressures.

US stocks seem poised to have a tug-of-war here over uncertainty with the economic backdrop and as the Fed reaction to surging pricing pressures will take a couple more months. Volatility will remain elevated until we get past the March FOMC decision.

Meta

The music stopped for Facebook.  The social media giant is in trouble over rising competition, surging metaverse costs, and zero growth. The metaverse is years away and this outlook is abysmal as surging Reality Labs costs will kill their margins this year.

Facebook’s discouraging earnings sent large parts of technology stocks down, especially social media companies.

US Data

A wrath of US data did nothing to change the outlook for the labor market recovery and surging pricing pressure environment.  Jobless claims trend remains intact and productivity continues to improve.  The omicron variant impact.  Efficiency has improved as companies have to adjust to surging prices and high labor costs.

The US service industry softened in January as the omicron wave continued to weigh on supply constraints and as businesses struggled with elevated costs and short labor supplies.  The headline ISM services index fell from 62.3 to 59.9, slightly better than the consensus estimate of 59.5.  The service sector slowdown will not last much longer, but it could persist into the second quarter. The labor shortage is a persistent problem that continues to fuel into surging costs which is now at unsustainable levels for some businesses.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya