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Technology shares were poised to extend gains on Wall Street on Tuesday, but Dow futures pointed to a struggle for the blue-chip index, 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.
Wednesday’s trading action also will see market participants pore over private-sector employment data for January from Automatic Data Processing, ahead of the monthly U.S. Labor Department jobs report on Friday which may provide an update on the health of the U.S. economy in the midst of the COVID-19 pandemic.
How are stock benchmarks performing?
- Futures for the Dow Jones Industrial Average YM00, -0.03% YMH21, -0.03% rose 3 points, or less than 0.1%, at 30,590.
- S&P 500 index futures ES00, +0.29% ESH21, +0.29% added 13.95 to reach 3,832.25, a gain of 0.4%.
- Nasdaq-100 futures NQ00, +0.61% NQH21, +0.61% advanced 89 points, or 0.7%, at 13,538.
On Tuesday, stocks finished sharply higher, with the Dow DJIA, +1.57% 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, +1.39% advanced 52.45 points, or 1.4%, to finish at 3,826.31, while the Nasdaq Composite Index COMP, +1.56% 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, -60.00%, and AMC Entertainment Holdings AMC, -41.20% steadying, and many investors are turning their attention to corporate earnings and economic data. After soaring last week GameStop, the 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 concerns 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.
Earnings reporting season continues on Wednesday with chipmaker Qualcomm, eBay, and PayPal due after the market closes.
Meanwhile, the U.S. will get a reading of private-sector employment from ADP at 8.15 a.m. Eastern Time. Wednesday which is estimated to show that 50,000 jobs were created in January, according to Econoday, after December’s reading showed a drop of 123,000, marking the first negative report since the onset of the pandemic.
In other U.S. economic data, Looking ahead, investors also await data on the U.S. services sector. The Institute for Supply Management’s services index for January is due at 10 a.m., and is expected to show a reading of 56.8, pointing to healthy expansion.
“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?
- Amazon.com AMZN, +1.11% 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. The news comes as the online sales and cloud-computing giant saw sales top $100 billion in a quarter for the first time and earnings reached a record level for the third consecutive quarter.
- Google parent Alphabet Inc. GOOG, +1.38% GOOGL, +1.38% posted record profits for a second straight quarter during the pandemic, sending shares surging 8% to a 52-week high in after-hours trading Tuesday.
- Spotify Technology S.A. SPOT reported Wednesday 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 Corp. BSX dropped in premarket trading Wednesday, 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 Inc. HWM 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 Co. SMG reported its first-ever fiscal first-quarter profit and sales that reached a record. Shares rose 3.3% in Wednesday premarket trading.
- Shares of Sherwin-Williams Co. SHW were indicated up in premarket trading Wednesday after the paints and coatings company said it would implement a three-for-one split of its common stock, effective April 1.
