The S&P 500 advanced 0.9% on Wednesday, driven by Alphabet (GOOG 2960.73, +203.16, +7.4%) following its earnings report and helped by lingering rebound momentum. The Dow Jones Industrial Average (+0.6%) and Nasdaq Composite (+0.5%) followed suit, while the Russell 2000 fell 1.0%.
Shares of Alphabet gained 7% after the company reported better-than-expected Q4 results and announced a 20-for-1 stock split. The latter generated speculation of greater retail interest in the stock and a potential inclusion in the Dow at some point.
The S&P 500 communication services sector, where Alphabet resides, climbed 3.1% to the top of the sector rankings. The other sectors also closed higher, except for consumer discretionary (-0.5%), which included earnings-related weakness in Starbucks (SBUX 97.73, -1.03, -1.1%) and General Motors (GM 53.50, -0.57, -1.1%).
Despite the strong performance in the S&P 500, and the gains in ten of its 11 sectors, there wasn’t the same level of bullishness from the prior days. There were more declining issues than advancing issues at both the NYSE and Nasdaq, and PayPal (PYPL 132.57, -43.23, -24.6%) plunged 25% on disappointing earnings results/guidance.
That might have been due to profit-taking pressure on the recognition that the major indices have bounced strongly off their January lows, pushing the Fed’s hawkish policy stance to the background of the trading narrative.
In addition, there were some misgivings about the U.S. sending 3,000 troops to NATO countries near Ukraine and the disappointing ADP Employment Change report. ADP estimated a net loss of 301,000 jobs to private-sector payrolls in January (Briefing.com consensus +220,000), lowering market expectations for the Employment Situation report on Friday.
The market hung in there, though, and after dipping into negative territory in early action, the large-cap indices drifted higher the rest of the session. Advanced Micro Devices (AMD 122.76, +5.98, +5.1%) was another earnings standout.
The Treasury market saw modest demand from buyers amid the geopolitical risks and negative employment data. The 2-yr yield decreased one basis point to 1.15%, and the 10-yr yield decreased two basis points to 1.77%. The U.S. Dollar Index fell 0.4% to 95.99 amid relative strength in the euro, which was a byproduct of ECB rate-hike expectations.
WTI crude futures settled little changed ($88.17/bbl, -0.04, -0.1%). In related news, OPEC+ reaffirmed its decision to increase production by 400,000 barrels per day in March, and the EIA reported an unexpected draw in weekly crude inventories (1.05 million).
Reviewing Wednesday’s economic data:
- The ADP Employment Change report estimated a net-loss of 301,000 jobs to private-sector payrolls in January (Briefing.com consensus +220,000). The increase in December was downwardly revised to 776,000 from 807,000.
- The weekly MBA Mortgage Applications Index rose 12.0% following a 7.1% decline in the prior week.
- Looking ahead to Thursday, investors will receive the ISM Non-Manufacturing Index for January, the weekly Initial and Continuing Claims report, Factory Orders for December, preliminary Q4 Productivity and Unit Labor Costs, and the final IHS Markit Services PMI for January.
Overseas:
- Europe: DAX +0.1%, FTSE +0.6%, CAC +0.2%
- Asia: Nikkei +1.7%, Hang Seng closed for holiday, Shanghai closed for holiday
Commodities:
- Crude Oil +0.29 @ 88.21
- Nat Gas +0.61 @ 5.45
- Gold +7.20 @ 1808.60
- Silver +0.14 @ 22.70
- Copper +0.07 @ 4.49