What Happened:
Shares of data warehouse-as-a-service Snowflake (NYSE:SNOW) jumped 9.4% in the afternoon session as the Nasdaq and S&P 500 surged after solid earnings from tech giants, including Meta (NASDAQ:META), which soared more than 20% (MAU/DAU growth, guidance beat, and dividend initiation), and Amazon (solid revenue beat). In addition, yields surged, with the 2-year Treasury yield rising to 4.38%, while the 10-year Treasury yield broke past the 4% mark as fresh labor market data exceeded expectations. The Bureau of Labour reported non-farm payrolls for January 2024, which revealed that the US economy added 353,000 jobs (versus expectations for +185,000 jobs). The strong jobs report points to a resilient economy despite worries about the lag effects of rate hikes potentially slowing down business activities. The strong market data could cause the Fed to delay cutting rates in 2024, with market participants expecting the first rate cut to be announced in the first half of the year.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Is now the time to buy Snowflake? Access our full analysis report here, it's free.
What is the market telling us:
Snowflake's shares are very volatile and over the last year have had 28 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago, when the stock dropped 5.4% as major stock indices fell, with the Nasdaq index recording the steepest decline compared to the S&P 500 and Dow after mixed earnings results from tech giants, including Alphabet (weak ad revenue), Microsoft (disappointing guidance), and AMD (weak guidance). These results likely tempered the optimism that had been building since the late 2023 rally as the new earnings season kicked off. Moreover, market participants eagerly awaited the outcome of the Fed's first policy meeting of the year, scheduled for January 31, 2024, with the consensus expectation for rates to remain unchanged in the range of 5.25% to 5.5%.
Snowflake is up 15.7% since the beginning of the year. Investors who bought $1,000 worth of Snowflake's shares at the IPO in September 2020 would now be looking at an investment worth $861.58.
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