The S&P 500 index closed lower on Friday, as a decline in Apple shares due to sluggish iPhone demand offset a surge in Amazon shares driven by its strong cloud computing performance. The market also reacted to a mixed July jobs report that showed lower-than-expected job growth but higher-than-expected wage inflation.
Apple shares drop after disappointing quarterly results
Apple Inc. (NASDAQ: AAPL) saw its shares fall by 4.8% on Friday, after the tech giant reported its quarterly results on Thursday. Although Apple beat analysts’ expectations on revenue and earnings, it failed to impress investors with its iPhone sales, which declined by 15% year-over-year. The company also issued a cautious guidance for the current quarter, suggesting that the weak iPhone demand may persist.
Analysts said that Apple is facing a challenging smartphone market, especially in developed regions, where consumers are holding on to their devices longer and facing competition from cheaper alternatives. UBS said in a note that the “gravity of a challenging smartphone market particularly in developed regions that should continue the rest of 2023 is a headwind for the stock.”
Amazon shares soar after impressive cloud business growth
Amazon.com Inc. (NASDAQ: AMZN), on the other hand, saw its shares rise by 8.3% on Friday, after the e-commerce giant reported its quarterly results on Thursday. Amazon beat analysts’ expectations on revenue and earnings, thanks to its robust growth in its cloud computing segment, Amazon Web Services (AWS). AWS revenue grew by 37% year-over-year, reaching $13.5 billion, and accounted for more than half of Amazon’s operating income.
Analysts praised Amazon’s cloud business performance, saying that it showed signs of stabilization and resilience amid the pandemic. Deutsche Bank said in a note that “the highlight of the quarter was arguably AWS revenue growth that came in about 2% points better than Street expectations, and most importantly management commentary that pointed towards a rationalization bottom with growth trends that have proved stable through July.”
July jobs report shows mixed signals for the economy
The market also digested the latest jobs report from the U.S. Bureau of Labor Statistics, which showed that the economy added 187,000 jobs in July, missing economists’ estimates of 200,000. However, the unemployment rate fell to 5.4%, beating expectations of 5.7%, and the average hourly earnings rose by 0.4%, indicating that the labor market remains tight and wages are rising.
The mixed jobs report raised questions about the pace and timing of the Federal Reserve’s tapering of its bond-buying program, which has been supporting the economic recovery from the pandemic. Some analysts said that the Fed may have delivered its final rate hike last month, as its tightening measures appear to be slowing down the economy and the labor market. Others said that the Fed may still proceed with tapering in September, as inflation pressures remain high.