Stocks Rebound Ahead of January Jobs Report

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Stocks closed higher Thursday, bouncing back from Wednesday's Fed-fueled selloff. Ahead of tonight's batch of Big Tech earnings from Amazon.com (AMZN, +2.6%), Apple (AAPL, +1.3%) and Meta Platforms (META, +1.2%), market participants took in some mixed economic data and dismal guidance from a one-time pandemic darling.

On the economic front, the Labor Department said initial jobless claims jumped to a three-month high of 224,000 last week. The data comes ahead of tomorrow's January jobs report, which will be "a key input" in the Fed's decision-making process, says Morgane Delledonne, head of investment strategy for Europe at Global X.

Meanwhile, data from both S&P Global and the Institute for Supply Management showed manufacturing activity improved from December to January. "Manufacturers have started the year with a spring in their step," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "Business optimism about the year ahead has surged to its highest since early 2022 thanks to a jump in demand."

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Still, Williamson says the data showed higher costs related to supply delays that could result in "renewed upward pressure on consumer prices" in the months ahead if this trend persists.

That last point is particularly important following this week's Fed meeting. While the central bank kept the federal funds rate unchanged again, it indicated it is in no rush to start cutting rates as long as inflation remains elevated.

Peloton plunges on weak guidance

In single-stock news, Peloton Interactive (PTON) plunged 24.3% after the athletic equipment maker, which gained major market share at the outset of the pandemic, reported earnings. While Peloton disclosed a narrower-than-expected loss for its fiscal second quarter on higher-than-anticipated revenue, it gave disappointing fiscal Q3 and full-year guidance.

"Our outlook is tempered by uncertainty surrounding our ability to efficiently grow Paid App subscribers and the performance of other new initiatives, as well as an uncertain macroeconomic outlook," wrote Liz Coddington, chief financial officer of Peloton, in the report.

Merck (MRK) was another post-earnings mover, only shares of the blue chip stock jumped 4.7%. The drugmaker disclosed fourth-quarter earnings of 3 cents per share on $14.6 billion in revenue, both figures higher than analysts were expecting.

New York Community Bancorp shares keep falling

Elsewhere, New York Community Bancorp (NYCB) continued to slide. Shares of the commercial real estate (CRE) lender slumped 11.3% today, bringing its two-day decline to 44.7%.

The selloff began Wednesday after the company said it swung to an unexpected per-share loss in the fourth quarter as loan losses surged. This caused the bank, which early last year acquired failed regional lender Signature Bank, to increase its loan-loss reserves. In order to boost its capital, NYCB also slashed its quarterly dividend to 5 cents per share from 17 cents per share.

BofA Securities analyst Ebrahim H. Poonawala says Q4 could mark a "kitchen-sink quarter" for the bank stock, but "the Street will likely need proof points that the worst impacts of credit/liquidity/capital builds are now reflected in earnings outlook and that management and regulators are in sync with NYCB’s balance sheet positioning." The analyst kept a Buy rating on NYCB.

As for the main indexes, the Dow Jones Industrial Average gained 1.0% to 38,519, the S&P 500 rose 1.3% to 4,906, and the Nasdaq Composite added 1.3% to 15,361.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.