Amazon’s Layoffs Impact Stock Market Rally as Profits Surge

Amazon announced this week that it has laid off over 14,000 employees, yet this development has not dampened investor enthusiasm. On Friday, the U.S. stock market experienced significant gains, led by Amazon’s robust financial performance that exceeded analysts’ expectations.

The S&P 500 rose by 0.6%, nearly recovering from a decline the previous day and approaching its all-time high set earlier in the week. This marks the index’s potential for its third consecutive winning week and sixth straight winning month, the longest streak since 2021. The Dow Jones Industrial Average gained 37 points, or 0.1%, while the Nasdaq composite soared by 1.3%.

Amazon’s Financial Performance Drives Market Upwards

Amazon’s stock surged by 11.6%, making it the largest contributor to the gains in the S&P 500. In its latest quarterly report, CEO Andy Jassy stated that the company’s cloud-computing sector has seen a reacceleration in growth, reaching levels not experienced since 2022. This renewed momentum helped bolster investor confidence, even as the company announced significant layoffs.

Apple also played a pivotal role in lifting market sentiment, with its stock increasing by 0.3%. CEO Tim Cook reported better-than-expected profits, largely driven by strong sales of the iPhone and robust performance in its services sector, which includes the app store. Both tech giants are crucial players in the market, collectively accounting for 10.6% of the S&P 500’s total value despite representing only 0.4% of its total membership. This highlights how their stock movements can significantly influence the index.

Wall Street Reacts to Broader Market Trends

In addition to Amazon and Apple, other companies also contributed to the positive market trend. Online platform Reddit saw its stock jump by 14.7% after reporting stronger-than-expected profits and revenues. Similarly, Coinbase Global experienced a 3.2% increase following a profit announcement that surpassed analysts’ forecasts.

Despite the overall positive sentiment, AbbVie faced a 3.7% decline even after posting better-than-expected profits. Analysts noted that while its earnings beat forecasts, the margin of surprise was smaller compared to earlier quarters, contributing to the stock’s drop.

Investors remain under pressure to justify the substantial increases in stock prices seen since April. There is growing criticism that the market may be overvalued, and companies are being urged to deliver strong profit growth to sustain current valuations.

Friday’s market gains served as a recovery from a downturn on Thursday, when the S&P 500 fell by 1%. Investor concerns were heightened due to planned spending increases from Meta Platforms and Microsoft linked to artificial intelligence investments. Furthermore, uncertainty surrounding a trade truce between the United States and China added to market apprehension.

International stock markets reflected mixed sentiments. European indexes dipped following a mixed finish in Asia. In Hong Kong, stocks fell by 1.4%, while Shanghai reported a 0.8% decline, driven by data indicating that factory activity in China contracted for the seventh consecutive month. Conversely, Japan’s Nikkei 225 index surged by 2.1% after a report showed industrial production rose by 2.2% month-on-month in September, exceeding expectations.

In the bond market, Treasury yields eased slightly after a recent increase. The yield on the 10-year Treasury dipped to 4.08%, down from 4.11% late Thursday, although it remains elevated compared to previous levels.

Overall, Amazon’s significant role in influencing market dynamics underscores the interconnectedness of major corporations and their impact on investor sentiment. As companies navigate the challenges of growth and profitability, the market remains vigilant, looking for signs of sustainability amid an evolving economic landscape.