Before the Bell: So Much Love for Just $40 Billion; Amazon, Apple, Google Earnings Coming in Just 12 Hours

Premarket action on Thursday had the three major U.S. indexes trading mixed. The Dow Jones industrials traded down 0.11%, while the S&P 500 was up 0.53% and the Nasdaq Composite was 1.4% higher.

Ten of 11 market sectors closed higher on Wednesday, with technology (2.29%) and consumer cyclicals (1.89%) posting the largest gains. Energy (−1.89%) was the day’s only loser. The Dow closed up 0.02%, the S&P 500 up 1.05% and the Nasdaq up 2%. As expected, the Federal Reserve raised the federal funds rate by 25 basis points to a new range of 4.5% to 4.75%. Fed Chair Jerome Powell said the central bank has “more work to do.”

Wednesday’s trading volume was well above the five-day average. New York Stock Exchange winners led losers by 2,227 to 855, while Nasdaq advancers led decliners by more than 2 to 1.

The weekly report on claims for unemployment benefits will be released before U.S. markets open. Economists expect new claims to total 201,000, up from 186,000 in the prior week. The preliminary fourth-quarter nonfarm productivity and unit labor costs also will be released before the opening bell. Productivity is expected to rise by 2.5%, compared to a third-quarter increase of 0.8%, and unit labor costs are projected to fall from the prior quarter’s 2.4% to 1.5%. If that works out, Thursday could deliver another boost to stocks.

Among S&P 500 stocks, chipmaker Advanced Micro Devices Inc. (NASDAQ: AMD) added 12.63%, after beating expected quarterly earnings per share (EPS) and revenue. Paper and packaging products maker WestRock Co. (NYSE: WRK) dropped 12.67%, after missing consensus profit and sales estimates and withdrawing guidance.

Since posting a 52-week low in early November, shares of Meta Platforms Inc. (NASDAQ: META) have fallen by about 54%. Thanks to a surprisingly upbeat earnings report late Wednesday, the stock was on its way to a share price gain of around 20% on Thursday. If that happens, Meta will have doubled its share price since posting that low. The company’s secret sauce is massive layoffs seasoned with less capital spending ($4 billion) and a $40 billion (10% of Meta’s market cap) share buyback. CEO Mark Zuckerberg said that 2022’s decline in revenue (the company’s first-ever year-over-year slide) simply “forced us to basically take a step back and say, OK, we can’t just treat everything like it’s hyper growth.”

Now that Zuckerberg has declared 2023 the “year of efficiency,” all that remains is for Meta to deliver. Capex is still estimated to rise to a range of $30 billion to $33 billion this year, but that is $4 billion less on each end than the company’s previous plan. The company’s Reality Labs, the virtual reality R&D bit, accounted for $13.7 billion in spending last year and Meta expects to “continue to invest meaningfully” in Reality (but perhaps not in reality).

Alphabet Inc. (NASDAQ: GOOGL), Inc. (NASDAQ: AMZN) and Apple Inc. (NASDAQ: AAPL) are all reporting quarterly earnings after markets close Thursday. Based on premarket action investors are expecting a strong showing from all three. Amazon and Alphabet traded up about 4% with about three hours to go until the opening bell, while Apple traded about 1% higher.

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