By Geoffrey Smith
Investing.com -- Facebook (NASDAQ:FB) owner Meta Platforms is set for a $200 billion wipeout when it opens later, after reporting a drop in users and predicting more pain from Apple (NASDAQ:AAPL)'s privacy settings late on Thursday. The mixed performance of the so-called FAANG stocks will make Amazon (NASDAQ:AMZN)'s earnings after the bell particularly interesting. Jobless claims data are due, a day after a shocking fall in private employment in January. The Bank of England is expected to raise its key rate for the second meeting in a row, but the European Central Bank is set to stay strictly in talking mode. Shell (LON:RDSa) adds to the good news from Big Oil. Here's what you need to know in financial markets on Thursday, 3rd February.
1. Meta's Mega Selloff
Facebook owner Meta Platforms is set to lose nearly $200 billion of market value when it opens later, after reporting its first ever drop in daily active users and a broader set of quarterly numbers that spelled various kinds of trouble for the company.
The company managed another gain in revenue thanks to higher ad rates, but the squeeze from Apple’s new privacy laws is set to get worse this year, costing it $10 billion in revenue, according to CEO Mark Zuckerberg. Profit, meanwhile, fell due to ever-heavier investment in long-term plays related to the so-called Metaverse.
That makes the Facebook owner the second of the once-untouchable FAANG club to endure a wipeout after its fourth-quarter report (Netflix (NASDAQ:NFLX) being the first). The numbers will add to the importance of Amazon’s results for market sentiment. The e-commerce giant reports after the close.
2. Jobless claims and unit labor costs
After the shock drop in private hiring in January reported by ADP, there’s an added spice to this week’s jobless claims numbers at 8:30 AM ET, which will show how quickly and to what degree the labor market is getting over the soft patch caused by the wave of Omicron-variant Covid-19. The Institute of Supply Management’s non-manufacturing index for January will also throw out some clues on that score, given that services were disproportionately hard hit by Omicron.
Analysts expect initial claims to have fallen to 245,000 from 260,000 the previous week. If that bears out, then it will put claims firmly back on a path to test their recent lows.
Also due later are data on U.S. unit labor costs for the fourth quarter, which will provide fresh fuel for the inflation debate.
3. Stocks set to open lower; T-Mobile set for new 2022 high
U.S. stock markets are set to open lower again after Meta’s shocking results sparked fears that even the most reliable cash generators of recent years aren’t immune to abrupt repricings. The owner of Facebook was in good company on Wednesday, with PayPal (NASDAQ:PYPL) also losing a quarter of its value in response to weak earnings and guidance.
By 6:15 AM ET, Dow futures were down 138 points, or 0.4%, while S&P 500 futures were down 1.3% and NASDAQ 100 futures were down 2.4%, more than reversing Wednesday’s gains.
Late earnings on Wednesday weren’t uniformly negative – T-Mobile blew past expectations and is marked up 7.4% at a new high for the year. McKesson (NYSE:MCK) stock is also set to open at a new all-time high after it handily beat expectations.
Companies reporting early on Thursday include pharma giants Eli Lilly (NYSE:LLY), Biogen (NASDAQ:BIIB) and Merck (NYSE:MRK), along with Honeywell (NASDAQ:HON), Cigna (NYSE:CI) and Becton Dickinson (NYSE:BDX). Joining Amazon later will be Estee Lauder (NYSE:EL), Ford Motor (NYSE:F) and Activision Blizzard (NASDAQ:ATVI).
4. ECB and BoE meetings
The Bank of England is set to raise its key interest rate in back-to-back meetings for the first time since before the Great Financial Crisis when its monetary policy council meets later. Analysts expect a 25-basis point increase to 0.5% in the refinancing rate.
That comes on the same day that the country’s energy markets regulator Ofgem announced it would lift the cap on some energy bills by 54% from April, a move that’s set to take a big bite out of disposable incomes, especially among low earners.
Meanwhile, over in Frankfurt, the European Central Bank will keep its interest rates unchanged despite a shock rise in inflation to 5.1% in January, suggesting that prices will stay higher for longer than the bank anticipated. That means the key variable will be any change in guidance about the pace at which it runs down its asset purchases after the scheduled end of the Pandemic Emergency program in March.
5. Oil weakens on fresh demand fears
Crude oil prices came off their recent highs after Meta’s earnings and the ADP payrolls report sent a chill through risk assets in general.
By 6:30 AM ET, U.S. crude futures were down 1.5% at $86.91 a barrel, while Brent crude futures were down 1.4% at $88.20 a barrel.
The market has overcome any brief disappointment it may have had about OPEC and its allies not speeding up the return of oil to the global market, but the spread of the new and more infectious subvariant of Omicron is leading to fresh fears that the disruption to demand may last longer than first thought.
Earlier, there was fresh evidence of prices restoring the health of Big Oil, as Shell followed Exxon (NYSE:XOM) in reporting stellar earnings. It also increased its buyback program by $3 billion. ConocoPhillips (NYSE:COP) reports its earnings later.
