Stocks set to head modestly higher Wednesday
Technology shares were poised to extend gains, but Dow futures pointed to struggles 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 a key reading on jobs on Friday, which will help provide an early read of the health of the U.S. economy in the midst of the COVID-19 pandemic.
How are stock benchmarks performing?
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 , seemingly driven by chat room forums on sites like Reddit, has apparently subsided, with shares of GameStop Corp. GME, -60.00%, and AMC Entertainment Holdings AMC, -41.20% steadying if not buoyant, and many investors are turning their attention to economic fundamentals and the all-important jobs market.
The U.S. will get a reading of private-sector employment from ADP, 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.
That report will be released at 8: 15 a.m. Eastern.
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.
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Looking ahead, investors also await data on the 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.
Which stocks are in focus?