Dow, S&P 500 book 3rd day of gains as investors focus on robust tech earnings, rising oil prices

What drove the market?

The Dow, S&P 500 index posted modest gains Wednesday, with energy and financial shares up after U.S. oil futures closed at a 12-month high of $55.69 a barrel, 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
GOOG,
+7.40{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
on Wednesday advanced 7.4{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} to close at a record $2,070.07, 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.
GME,
+2.68{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}.

After soaring last week, GameStop stock slumped more than 70{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} in the past two days, but climbed 2.7{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} 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.

Related: The SEC could cripple Robinhood’s business model by enforcing existing rules, experts say

Will Geisdorf, senior research analyst with Sarasota, Fla.-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 overvalued.

“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.

St. Louis Federal Reserve President James Bullard added the dialogue Wednesday, saying he thinks U.S. economic growth could top 6{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} this year and grow faster than China in 2021.  

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
KRE,
+0.86{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
and small-cap companies
RUT,
+0.38{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
rallying.

Earnings reports 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{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} of US GDP so the updates will be closely watched,” wrote David Madden, market analyst at CMC Markets. 

Which stocks were in focus?

• Shares of Eastman Kodak Co. 
  KODK,
  +16.31{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  surged 16.3{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} following active afternoon trade Wednesday briefly triggered a volatility pause.

• Amazon.com
  AMZN,
  -2.00{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  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 fell 2{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} Wednesday.

• Google parent Alphabet Inc.
  GOOG,
  +7.40{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}

  GOOGL,
  +7.28{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  posted record profits for a second straight quarter of the pandemic Tuesday, sending shares surging 7.4{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}.

• Spotify Technology S.A. SPOT shares slumped 8.1{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} on Wednesday after it 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 Corp. BSX gained 2.2{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} 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 shares added 0.8{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} after it reported 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 rose 5.1{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} after reporting its first-ever fiscal first-quarter profit and sales that reached a record.

• Shares of Sherwin-Williams Co. SHW fell 1.3{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} after the paint company said it would implement a three-for-one split of its common stock, effective April 1.

What did other markets do?

• The yield on the 10-year Treasury note
  TMUBMUSD10Y,
  1.147{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  rose about 2.4 basis points to 1.129{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} and the 30-year bond
  TMUBMUSD30Y,
  1.938{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  passed a key threshold as investors embraced riskier assets. Yields and bond prices move in opposite directions.

• The ICE U.S. Dollar Index,
  DXY,
  -0.06{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
   a measure of the currency against a basket of six major rivals, was fractionally lower, near 91.13.

• Oil futures rose on hopes for more stimulus spending, with the U.S. benchmark
  CL.1,
  +0.18{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
   closing up 1.7{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} to settle at a 1-year high of $55.69 a barrel on the New York Mercantile Exchange. Gold futures
  GC00,
  -0.09{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
   gained 0.1{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}, to settle at $1,835.10 an ounce, on signs the precious metal may have been oversold. Silver prices
  SI00,
  -0.07{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  resumed their upward march, gaining 1.8{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}.

• The Stoxx 600 Europe index
  SXXP,
  +0.33{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
   settled 0.3{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} higher, while London’s FTSE 100
  UKX,
  -0.14{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  fell 0.1{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}.

• In Asia, the Shanghai Composite
  SHCOMP,
  -0.46{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  closed 0.5{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} lower, Hong Kong’s Hang Seng Index
  HSI,
  +0.20{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
  gained 0.2{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae} and Japan’s Nikkei 225
  NIK,
  -0.60{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}
   advanced 1{b7957974ac228b8f2b2640b69801411293490bb3d7d6382f1a99eb7b62ccaeae}.