Gold – U.S. tech stock higher, but Dow slips with focus on earnings and economic data
Technology shares extended small gains Wednesday morning, but the Dow and S&P 500 index slipped, as investors parsed healthy earnings from some of the country’s tech titans, including Amazon.com and Google parent Alphabet in the second-busiest week for earnings of the fourth quarter.
How are stock benchmarks performing?
DJIA,
-0.16%
fell 59 points, 0.2%, to trade near 30,629.
SPX,
+0.13%
added 4 points to reach 3,831, a gain of 0.1%.
COMP,
+0.13%
advanced 39 points, or 0.3%, to 13,652.
On Tuesday, stocks finished sharply higher, with the Dow
DJIA,
-0.16%
jumping 475.57 points, or 1.6%, to 30,687.48, and marking its best percentage gain in three months. The S&P 500
SPX,
+0.13%
advanced 52.45 points, or 1.4%, to finish at 3,826.31, while the Nasdaq Composite Index
COMP,
+0.13%
closed up 209.38 points, or 1.6%, to end at 13,612.78.
What’s driving the market?
Frenzied trading, driven by chat room forums on sites like Reddit, looks to have subsided, with shares of GameStop Corp.
GME,
+4.08%,
and AMC Entertainment Holdings
AMC,
+7.69%
steadying, and investors are turning their attention to corporate earnings and economic data. After soaring last week GameStop stock has slumped more than 70% and was down slightly in premarket trade on Wednesday.
To discuss the volatility inspired by individual investors in the internet chatrooms like Reddit, U.S. Treasury Secretary Janet Yellen has called a meeting with the Securities and Exchange Commission, the Federal Reserve Board, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission, according to a statement from her department.
As the corporate earnings reporting season rolls on, investors have thus far been emboldened by better-than-expected results from the likes of Amazon, which reported fourth-quarter revenue of $125.6 billion, trouncing its own forecast and analysts’ expectations. Profit also hit a record for the third consecutive quarter and Amazon Web Services head Andy Jassy will replace Amazon founder Jeff Bezos in the third quarter.
“Good earnings from the tech giants have set the stage for another positive opening this morning,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities.
However, Cardillo cautioned that investors remained concerned about pricey valuations and overbought conditions that suggest that markets may still need a further pullback to purge some of its excesses.
“Although, the key tech earnings reported last evening are fueling another positive session, the markets overbought condition remains a serious threat to the rally,” he said.
Will Geisdorf, senior research analyst with Sarasota, Florida-based Allegiant Private Advisors, takes a slightly rosier view. A stretch of bad economic numbers, like December’s jobs report, combined with a market that was a bit over its skis to produce a needed pullback, Geisdorf said in an interview.
“A little bit of the air is coming out of the volatility,” he said. “It looks like we’re about to get some additional stimulus, and the package that was passed recently is just starting to work its way into the economy. That will be an upside catalyst.”
Geisdorf sees confirmation that the reflationary trade is back on in a litany of indicators: the 30-year Treasury bond yield breaking out, energy prices touching a one-year high, regional banks
KRE,
-0.30%
and small-cap companies
RUT,
-0.59%
rallying.
Earnings reporting season continues on Wednesday with chipmaker Qualcomm, eBay, and PayPal due after the market closes.
A reading of private-sector employment from ADP showed 174,000 jobs were created in January, blowing past the Econoday consensus of 50,000 jobs and improving on the 78,000 December decline, a number that was revised higher from the initially reported drop of 123,000.
Wednesday also brought data on the U.S. services sector. The January services index from the Institute for Supply Management showed a reading of 58.7, stronger than expected, with an even better reading on the forward-looking new orders section.
“Services account for approximately 70% of US GDP so the updates will be closely watched,” wrote David Madden, market analyst at CMC Markets.
Meanwhile, market participants continue to watch developments surrounding President Joe Biden’s $1.9 trillion COVID aid package, and a counter offer from a group of Republicans this week that was less than half of president’s proposed amount. The Senate on Tuesday voted 50-49 to open a debate on budget resolution for the 2021 fiscal year, a move that paves the way for much of Biden’s stimulus package to become law without the need for any Republican support.
Which stocks are in focus?
AMZN,
-0.34%
founder Jeff Bezos announced Tuesday afternoon that he will step down as CEO in the third quarter of 2021 and Amazon Web Services head Andy Jassy will take over. Shares slipped marginally in early trade.
GOOG,
+7.52%
GOOGL,
+7.52%
posted record profits for a second straight quarter during the pandemic, sending shares surging more than 7% in early trading Tuesday.
What are other markets doing?
TMUBMUSD10Y,
1.120%
rose 2.3 basis points to 1.125% and the 30-year bond
TMUBMUSD30Y,
1.903%
neared a key threshold as investors embraced riskier assets. Yields and bond prices move in opposite directions.
DXY,
-0.00%
a measure of the currency against a basket of six major rivals, was fractionally lower, near 91.13
CL.1,
+2.03%
up nearly 2% to $55.80 a barrel on the New York Mercantile Exchange. Gold
GC00,
+0.13%
gained 0.1%, to trade near $1,835.30 an ounce, on signs the precious metal may have been oversold. Silver prices
SI00,
+2.15%
resumed their upward march, gaining 2.4% in the morning.
SXXP,
+0.32%
rose 0.3%, while London’s FTSE 100
UKX,
-0.11%
fell 0.3%.
SHCOMP,
-0.46%
closed 0.5% lower, Hong Kong’s Hang Seng Index
HSI,
+0.20%
gained 0.2% and Japan’s Nikkei 225
NIK,
+1.00%
advanced 1%.
Gold – U.S. tech stock higher, but Dow slips with focus on earnings and economic data
