A busy week on Wall Street ended with wild swings for stocks as investors took in a mixed bag of Big Tech earnings and a shockingly strong monthly jobs report. After bouncing between positive and negative territory throughout the day, the major benchmarks ultimately ended Friday on a down note.
The shakiness started last night after Apple (AAPL, +2.4%), Amazon.com (AMZN) and Alphabet (GOOGL, +2.8%) reported earnings. All three tech giants fell short of bottom-line estimates in their quarterly results, while Apple and Alphabet also missed on the top line. Despite its Q4 revenue beat, though, Amazon stock tumbled 8.4% – the worst return of the day for the group – as growth in its Amazon Web Services cloud segment slowed. "One common theme among the tech giants was growing concern about consumer weakness and challenging economic conditions," says José Torres, senior economist at Interactive Brokers.
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This morning's January jobs report only added to investor uncertainty. The Labor Department said the U.S. economy added a jaw-dropping 517,000 jobs last month, well above economists expectations for 189,000 new jobs. Additionally, the unemployment rate declined to 3.4% from 3.5% in December – its lowest level since 1969. Today's data complicates the Fed's efforts to bring down inflation by aggressively hiking interest rates.
"The disinflation process may have begun, but a strong labor market may prove troubling for bets for inflation to continue to drop quickly," says Edward Moya, senior market strategist at currency data provider OANDA. "Investors expecting that the Fed will cut rates at the end of the year might be in for a rude awakening. We won't see linear moves with inflation trends and that should make it unlikely for inflation to be at low enough levels to justify rate cuts."
After falling at the open in reaction to tech earnings and the jobs report, the major benchmarks found their way into positive territory by late morning. But by the close, the indexes had swung back into negative territory, with the Dow Jones Industrial Average ending down 0.4% at 33,926, the S&P 500 off 1.0% at 4,136, and the Nasdaq Composite 1.6% lower at 12,006.
The Best Utility Stocks to Buy
We often talk about the importance of dividend-paying stocks as a means of not only providing additional income for investors, but also creating a ballast for portfolios against a volatile market.
One sector known for having these defensive qualities is utilities. Case in point: The utility sector is down around 2% on a year-over-year basis, compared to a nearly 10% decline for the broad market. Plus, the utility sector – which is known for having some of the best dividend stocks – currently sports an attractive 3% yield, almost double that of the S&P 500.
And the best utility stocks tend to be more stable than companies in other sectors, as well as have reliable revenue streams that often support healthy and consistent dividends over the long term.
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