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MARKET SNAPSHOT

Stocks on Wall Street were little changed late morning Wednesday, after recovering most of last week’s losses on Monday and Tuesday, with tech stocks up after healthy earnings from Amazon and Google, but the Dow down in the second-busiest week for earnings reports for the quarter.

How are stock benchmarks performing?

  • The Dow Jones Industrial Average fell 42 points, 0.1%, to trade near 30,646.
  • The S&P 500 index added 5 points to reach 3,832, a gain of 0.1%.
  • The Nasdaq Composite advanced 21 points, or 0.2%, to about 13,634.

On Tuesday, stocks finished sharply higher, with the Dow  jumping 475.57 points, or 1.6%, to 30,687.48, and marking its best percentage gain in three months. The S&P 500 advanced 52.45 points, or 1.4%, to finish at 3,826.31, while the Nasdaq Composite Index closed up 209.38 points, or 1.6%, to end at 13,612.78.

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What’s driving the market?

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 and small-cap companies 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.

Frenzied trading, driven by chat room forums on sites like Reddit, looks to have subsided, with shares of GameStop Corp.GME, and AMC Entertainment Holdings AMC steadying, and investors are turning their attention to corporate earnings and economic data. After soaring last week GameStop stock has slumped more than 70% but steadied 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.

Which stocks are in focus?

  • Amazon.com 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 0.3%.
  • Google parent Alphabet Inc. posted record profits for a second straight quarter during the pandemic, sending shares surging nearly 8%.
  • Spotify Technology S.A. SPOT  on Wednesday reported a narrower-than-expected fourth-quarter loss, as revenue and monthly active users (MAUs) topped forecasts, but provided a downbeat first-quarter revenue outlook.
  • Shares of Boston Scientific CorpBSX gained 1.8% after the medical technology company reported fourth-quarter profit and revenue that fell more than expected, and provided a downbeat first-quarter outlook.
  • Howmet Aerospace IncHWM said Wednesday it had net income of $106 million, or 24 cents a share, in the fourth quarter, down from $118 million, or 27 cents a share, in the year-earlier period.
  • Scotts Miracle-Gro CoSMG reported its first-ever fiscal first-quarter profit and sales that reached a record. Shares jumped 6.3% midday
  • Shares of Sherwin-Williams CoSHWwere rising Wednesday morning after the paint company said it would implement a three-for-one split of its common stock, effective April 1.

What are other markets doing?

  • The yield on the 10-year Treasury note rose about 2 basis points to 1.119% and the 30-year bond neared a key threshold as investors embraced riskier assets. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index,  a measure of the currency against a basket of six major rivals, was fractionally lower, near 91.13.
  • Oil futures jumped on hopes for more stimulus spending, with the U.S. benchmark  up 2.5% to $56.13 a barrel on the New York Mercantile Exchange. Gold futures  gained 0.1%, to trade near $1,836 an ounce, on signs the precious metal may have been oversold. Silver prices resumed their upward march, gaining 2.4% in the morning.
  • The Stoxx 600 Europe index   rose 0.4%, while London’s FTSE 100   was fractionally lower.
  • In Asia, the Shanghai Composite closed 0.5% lower, Hong Kong’s Hang Seng Index   gained 0.2% and Japan’s Nikkei 225  advanced 1%.
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