Investors saw a 0.10% decline in the Nasdaq today, while the S&P 500 slipped 0.24%. However, that’s much better than where the markets were in the first few hours of the day on Friday. Stocks initially sold off somewhat hard in the session after the June jobs report was released.
The non-farm payrolls report showed that 224,000 jobs were added to the economy in June. That far outpaced economists’ expectations of 160,000 jobs and follows the May report which missed analysts’ expectations by a wide margin.
There were already calls for the Federal Reserve to cut interest rates before the May jobs report was released. Once it missed expectations though, those calls grew even louder. In fact, investors started to clamor for a 50 basis point cut, rather than just a 25 basis point cut.
With the latest report coming in notably ahead of estimates, the expectations for a 50 bps cut are dwindling quickly.
Breaking Down the Rate Cuts
Obviously, the jobs report is the big driver on Friday. Particularly when the market was closed on Thursday for the Fourth of July and while volumes are light. Just hours after the NFP report was released, we now see that Fed Funds futures are calling for a less than 5% chance of a 50 basis point cut.
Notably though, they still call for a 95% chance of a 25 basis point cut. If the Fed opts not to cut interest rates at this month’s meeting (July 30-31), it’s going to cause issues in the stock market.
How do rates relate to tech stocks and the Nasdaq today? The Nasdaq fell almost 1% on the day at the lows, before recovering later in the day. While tech is not the most rate-sensitive sector out there, it’s hard to argue that lower rates are bad for tech stocks. It makes borrowing cheaper and given that many of these companies use debt to fuel their growth — like Tesla (NASDAQ:TSLA) or Netflix (NASDAQ:NFLX) for instance — that’s good for their financials. Further, stock valuations benefit from lower interest rates and when multiples expand, tech is one of the biggest beneficiaries.
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As for the Nasdaq today, the index made a near-perfect pullback to the key 8,100 level. The index promptly bounced from this mark and closed up toward 8,162. While it did breach 8,100 temporarily, Friday’s action was pretty healthy overall. Let’s see if 8,100 can hold up as support again next week, and potentially push the Nasdaq to new highs.
News in the Nasdaq Today
Samsung (OTCMKTS:SSNLF) warned that its profit fell by 56% in the quarter. Sluggish demand for smartphones and memory chips weighed on the tech giant’s bottom line.
Given the action and news we’ve seen and heard from other chip and memory stocks — Broadcom (NASDAQ:AVGO) and Micron (NASDAQ:MU) for instance — Samsung’s announcement is no surprise. Micron, Nvidia (NASDAQ:NVDA), Intel (NASDAQ:INTC), Skyworks (NASDAQ:SWKS), NXP Semiconductors (NASDAQ:NXPI) and others fell on the news too.
Shares of Electronic Arts (NASDAQ:EA) were under further pressure Friday, falling more than 4% on the day. The stock is now down 7.5% for the week, as the company releases its second season of Apex Legends. The action is very disappointing, with the stock blowing through various moving averages and solidifying its range resistance. On the plus side though, key support is still holding up.
Amazon (NASDAQ:AMZN) found itself in the news for a few reasons on Friday.
First, Amazon filed for permission with the FCC to launch more than 3,200 satellites into orbit with the intention to provide broadband internet. It’s not unlike some of the internet ambitions we’ve heard from companies like Elon Musk’s SpaceX, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB). Amazon believes its internet plans — called the Kuiper project — can serve tens of millions of customers at one point.
Elsewhere, Amazon hit a regulatory hurdle with its $575 million investment of Deliveroo. U.K. regulators have ordered the e-commerce giant to pause on its investment into the company while it weighs the competitive implications of the deal.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AVGO, NVDA, AMZN and GOOGL.
