Feb 4th Pre-Market

Good morning.

Markets selling off for a third straight day. January layoffs hit their highest level since the 2009 financial crisis while hiring plans dropped to record lows.

The Fed's entire "we can wait" stance assumes employment holds, that assumption took real damage the past 2 days. Rate cuts might be coming quicker then we thought.

Let's dig in...

Today's Big Picture

1. Labor Market Cracking 
Challenger, Gray & Christmas → the firm that tracks corporate layoff announcements - reported 108,435 cuts in January. Highest since 2009. Hiring plans hit their lowest since they started tracking. Companies cutting jobs and freezing hiring at the same time means demand is weakening. The Fed's "we can wait" stance assumes employment holds. That assumption looks shaky now.

2. Bitcoin Gives Back the Trump Trade 
Bitcoin broke $70k for the first time since November 2024. Every dollar gained since Trump won is gone.

The thesis was simple: pro-crypto president, regulatory clarity, maybe a strategic bitcoin reserve. None of that has materialized into policy. Meanwhile $70k was the level the "institutional floor" crowd pointed to as proof bitcoin had matured past its volatile past.

3. Alphabet's Spending Problem Alphabet 
$GOOGL beat on revenue ($114 billion, up 18%) and earnings ($34.5 billion, up 30%). Stock fell anyway. Reason: AI capex guidance of $185 billion this year, roughly double last year. The market is no longer rewarding AI spending. It wants to see AI returns.

Market Overview

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Stock Spotlight (pre-market)

Alphabet $GOOGL ( ▼ 0.98% ) 
beat on both lines. Market didn't care. $185 billion in AI spending spooked investors more than 30% earnings growth impressed them.

Qualcomm $QCOM ( ▼ 7.97% ) 
hit its lowest since April's tariff selloff after weak guidance. CEO blamed a memory shortage - AI data centers are hoarding chips and phone makers can't get supply.

Strategy $MSTR ( ▼ 15.01% ) 
sank as bitcoin broke $70,000. When your whole company is a bitcoin bet, days like this hurt.

Amazon $AMZN ( ▼ 4.52% ) 
reports tonight. Last mega-cap this week. After Alphabet got hit for AI spending plans, any big capex number probably gets sold.

Peloton $PTON ( ▼ 26.65% ) 
missed on a weak holiday quarter. AI products aren't selling and higher subscription prices are pushing customers away.

Estée Lauder $EL ( ▼ 21.44% ) 
The owner of MAC and other beauty brands lifted its adjusted earnings outlook for the year but still expects a roughly $100 million hit from tariffs. Shares dropped about 10% ahead of the bell.

What to Watch

Amazon Earnings Tonight 
Last of the mega-caps to report this week. AWS growth rate and any AI capex guidance will move futures tomorrow. After Alphabet's reaction, anything over $75 billion in capex guidance probably gets sold.

Software Sector Carnage 
JPMorgan's analyst said the sector is "now being sentenced before trial." If you're looking for a contrarian entry point, this is when to start building a shopping list. I'm not saying buy today, but start watching names that fell 30-40% on nothing company-specific.

Friday Employment Setup 
Given today's layoff data and claims miss, any weakness in Friday's jobs report will get amplified. The setup is fragile.

Thanks for reading 🙂

- John

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