S&P 500 reverses early session dip to 4450 to trade above 4500 as strong US jobs/Amazon earnings digested

Trade was choppy towards the start of the US session as investors weighed up the implications of the latest much stronger than expected US labour market earnings on the outlook for Fed policy and interest rates. The S&P 500 was at one point trading as much as 0.5% lower as it slipped back to test the 4450 level, but has since seen an 70 point rally to trade in the 4520 area, now nearly 1.0% higher on the day. The index, despite reversing back sharply from near 4600 highs on Wednesday in wake of ugly earnings from Meta Platforms, looks set to close out the week about 2.3% higher.

Supporting sentiment on the final trading day of the week was a more than 15.0% rally in Amazon’s share price post-earnings which spurred a broader recovery in the Tech sector. Amazon will raise the price of its US Prime subscription to offset higher costs, the company announced in its latest earnings release. The S&P 500 GICS Consumer Discretionary index to which Amazon belongs rallied nearly 5.0%, while the big tech-dominated Information Technology and Communication Services indices also rose around 1.0% each. Strong earnings from Snapchat and Pinterest sent their shares a respective more than 60% and 12% higher each, adding to the broad tech sector tailwinds.

Coming up next week, earnings will remain in focus, though most of the mega-cap stocks have now reported. Otherwise, focus will remain on the macro picture, with US Consumer Price Inflation data scheduled for release on Wednesday. The Fed has explicitly said that any “worsening” of the inflation problem could see them act more aggressively, so any upside surprise is likely to see markets pricing in an increased likelihood that the bank hikes rates by 50bps in March.