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MARKET SNAPSHOT

U.S. stocks were trading near session highs Wednesday afternoon, after Amazon and Google reported healthy results in the second-busiest week of the quarter earnings reports and with energy stocks up after oil briefly rose to a 12-month high around $56 a barrel and financial stocks rose with bond yields.

How are stock benchmarks performing?

  • The Dow Jones Industrial Average rose 74 points, 0.2%, to trade near 30,762, after earlier trading in negative territory.
  • The S&P 500 index added 17 points to reach 3,843, a gain of 0.5%.
  • The Nasdaq Composite advanced 66 points, or 0.5%, to about 13,680.

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?

The Dow, S&P 500 and Nasdaq Composite all were posting modest gains Wednesday, with energy, technology and financial shares up after U.S. oil futures briefly traded above $56 a barrel, a 12-month high, two tech giants reported robust quarterly earnings, and as a steeper bond yield curve benefited banks.

“Oil has moved above its $54 range,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management, pointing to expectations of increased future demand as the vaccine rollout gathers steam and the recent shutdown by the Biden administration of the Keystone XL pipeline project as catalysts. “That is what’s helping drive the energy space up,” he told MarketWatch.

Corporate earnings reporting season also has been in high gear, with investors thus far emboldened by better-than-expected results, including from the likes of Google parent Alphabet and Amazon.

Alphabet’s stock on Wednesday hit a record high above $2,100, up 9.3% in afternoon traded, after the search-engine behemoth reported its most-profitable quarter ever ($15.23 billion) on Tuesday.

Amazon also reported a record fourth-quarter profit and revenue of $125.6 billion on Tuesday, trouncing its own forecast and analysts’ expectations. It also said Amazon Web Services head Andy Jassy will replace Amazon founder Jeff Bezos in the third quarter.

But the broader stock market has struggled to punch substantially higher after recouping much of last week’s losses, which were tied to a short-squeeze drama that swept up a handful of smaller stocks, including GameStop Corp.

After soaring last week, GameStop stock slumped more than 70% in the past two days, but was back up more than 14% Wednesday, after the company said it hired former Amazon Web Services cloud business engineer Matt Francis as chief technology officer, effective Feb. 15.

To discuss the volatility inspired by individual investors in internet chat rooms 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.

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Meanwhile, Will Geisdorf, senior research analyst with Sarasota, Florida-based Allegiant Private Advisors, said stocks were being held back from making significant gains by a stretch of bad economic numbers, like December’s jobs report, combined with a market that was a bit over its skis.

“A little bit of the air is coming out of the volatility,” he told MarketWatch. “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.”

President Joe Biden’s $1.9 trillion COVID aid package has been met by a counter offer this week from a group of Republicans, which 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.

Even so, Geisdorf sees the reflationary trade already making a revival, evidenced by the 30-year Treasury bond yield breaking out, energy prices touching a one-year high and regional banks and small-cap companies rallying.

Earnings reports also continue Wednesday, with chip maker Qualcomm, eBay, and PayPal due after the market closes.

In economic data, 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.

The services side of the U.S. economy also sped up in January, with the Institute for Supply Management showing a reading of 58.7 on Wednesday, 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. 

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 edged 0.1% lower.
  • Google parent Alphabet Inc. posted record profits for a second straight quarter during the pandemic, sending shares surging 9.2%.
  • 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 2.1% 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 5%.
  • Shares of Sherwin-Williams CoSHWwere 0.4% lower 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 1.12% and the 30-year bond passed 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 91.15.
  • Oil futures jumped on hopes for more stimulus spending, with the U.S. benchmark  up 1.9% to $55.78 a barrel on the New York Mercantile Exchange. Gold futures  gained 0.1%, to settle at $1,835.10 an ounce, on signs the precious metal may have been oversold. Silver prices resumed their upward march, gaining 1.8%.
  • The Stoxx 600 Europe index  rose 0.3%, while London’s FTSE 100   fell 0.1%.
  • 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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