Upbeat Earnings News May Lead To Continued Strength On Wall Street

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks poised to extend the rally seen over the two previous sessions.

Continued buying interest may be generated in reaction to upbeat earnings news from tech giants Alphabet (GOOGL) and Amazon (AMZN).

Shares of Alphabet are spiking by more than 7 percent in pre-market trading after the Google parent reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Online retail giant Amazon is also seeing notable pre-market strength after reporting better than expected fourth quarter results.

Amazon also announced CEO Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021, with Amazon Web Services chief Andy Jassy set to become CEO at that time.

Positive sentiment may also be generated in reaction to a report from payroll processor ADP showing a much stronger than expected rebound in private sector employment in the month of January.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

Economists currently expect employment to rise by 50,000 jobs in January after falling by 140,000 jobs in December. The unemployment rate is expected to hold at 8.7 percent.

Stocks moved sharply higher during trading on Tuesday, extending the strong upward move seen on Monday. With the continued advance on the day, the markets further offset the steep losses posted last week.

The major averages all finished the day firmly in positive territory. The Dow surged up 475.57 points or 1.6 percent to 30,687.48, the Nasdaq jumped 209.38 points or 1.6 percent to 13,612.78 and the S&P 500 shot up 52.45 points or 1.4 percent to 3,826.31.

The continued strength on Wall Street came as stocks that recently benefited from the retail trading frenzy moved sharply higher.

Video game retailer GameStop (GME), which is seen as the poster child for the so-called “retail investor revolt,” plummeted by 60 percent after plunging by more than 30 percent on Monday.

Shares of AMC Entertainment (AMC) also tumbled by 41.2 percent after the movie theater chain ended the previous session modestly higher.

The markets also benefited from a positive reaction to the latest earnings news, with Exxon Mobil (XOM) moving notably higher after reporting better than expected fourth quarter earnings.

Delivery giant UPS (UPS) also showed a strong move to the upside after reporting fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Traders also remain optimistic about more fiscal stimulus after President Joe Biden met with a group of ten Republican Senators who have offered a counterproposal to his $1.9 trillion relief plan.

Senator Susan Collins, R-Maine, called the meeting “very productive” and said the two sides plan to continue negotiations.

A White House statement also described the meeting as “productive” but noted that Democrats could still use the reconciliation process to pass a relief bill without Republican support.

Banking stocks saw substantial strength on the day amid easing concerns about the retail trading frenzy, with the KBW Bank Index spiking by 2.7 percent.

Significant strength was also visible among transportation stocks, as reflected by the 2.2 percent jump by the Dow Jones Transportation Average.

Brokerage stocks also turned in a strong performance, resulting in a 1.9 percent advance by the NYSE Arca Broker/Dealer Index.

Chemical, semiconductor and computer hardware stocks also saw considerable strength, while gold stocks bucked the uptrend amid a steep drop by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are climbing $0.65 to $55.41 a barrel after jumping $1.21 to $54.76 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,841.30, up $7.90 compared to the previous session’s close of $1,833.40. On Tuesday, gold plunged $30.50.

On the currency front, the U.S. dollar is trading at 105.03 yen compared to the 104.98 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2014 compared to yesterday’s $1.2044.

Asia

Asian stocks rose broadly on Wednesday as investors cheered strong earnings from Alphabet and Amazon as well as positive news related to Covid-19 vaccine supplies and U.S. stimulus plans.

Chinese markets slipped as the People’s Bank of China drained some funds from the financial system and a private survey showed Chinese service sector activity grew at its slowest pace in nine months in January.

The benchmark Shanghai Composite Index dropped 16.38 points, or 0.5 percent, to 3,517.31, while Hong Kong’s Hang Seng Index ended up 58.76 points, or 0.2 percent, at 29,307.46.

Japanese shares closed higher despite the government extending a coronavirus state of emergency in Tokyo and nine other areas through March 7.

With domestic companies and global IT firms reporting robust earnings, investors shrugged off data showing that Japan’s services sector shrank at the fastest pace in five months in January.

The Nikkei 225 Index jumped 284.33 points, or 1 percent, to 28,646.50, while the broader Topix closed 1.3 percent higher at 1,871.09.

Mitsubishi Motor surged 11.3 percent after the company upgraded its full-year earnings guidance. Similarly, Panasonic jumped 3.8 percent after raising its earnings forecasts for the current year through March.

Australian markets ended notably higher, with financials leading the surge on the RBA’s upbeat economic outlook. The benchmark S&P/ASX 200 Index climbed 62.00 points, or 0.9 percent, to 6,824.60, while the broader All Ordinaries Index closed 0.9 percent higher at 7,090.90.

The big four banks rose between 1.2 percent and 1.9 percent, while miners BHP and Rio Tinto dropped 1-2 percent as iron ore prices descended from recent highs on weak Chinese demand ahead of the Lunar New Year holidays.

Santos, Origin Energy, Beach Energy and Oil Search gained 1-2 percent after oil prices hit their highest level in a year on supply cuts.

In economic news, the total number of building permits issued in Australia jumped a seasonally adjusted 10.9 percent sequentially in December, while service sector activity in the country expanded at a slower rate in January, separate reports showed.

Seoul stocks rose for the third straight day as foreign investors continued their buying streak on expectations of a speedy economic recovery in Asia and globally.

The benchmark Kospi jumped 32.87 points, or 1.1 percent, to close at 3,129.68 after gaining more than 4 percent in the past two sessions.

Hyundai Motor rallied 2.1 percent and its affiliate Kia Motors soared 9.7 percent on reports that Kia may have seen some progress in its talks with Apple Inc. for a potential partnership in developing electric cars. Auto parts maker Hyundai Mobis advanced 3.9 percent.

Europe

European stocks have risen for the third straight session on Wednesday amid expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies. Strong earnings from Alphabet and Amazon have also boosted sentiment.

While the U.K.’s FTSE 100 Index is just above the unchanged line, the French CAC 40 Index is up by 0.3 percent and the German DAX Index is up by 0.6 percent.

Novo Nordisk have moved sharply higher after the Danish pharmaceutical company gave upbeat sales and profit forecasts for 2021.

Santander has also advanced. After meeting its profit guidance for 2020, the Spanish bank said it expects higher profitability this year.

British telecommunications company Vodafone has also shown a strong move to the upside after re-affirming its earnings targets.

Publicis Groupe shares have also surged. After reporting better than expected organic growth in the fourth quarter, the French advertising agency company said it will hand back all of the salary reductions that 6,000 higher-earning staff voluntarily took during the worst of the coronavirus downturn.

Siemens has also moved higher after the German engineering company beat first-quarter expectations and raised its guidance for the year.

Shares of Freenet have also soared after the telecommunications company announced plans to repurchase up to 9.75 million shares.

In economic news, the euro area private sector contracted further in January amid the Covid-19 pandemic, as a decline in services was only partially offset by growth in the manufacturing sector, final survey results from IHS Markit showed.

The final composite output index dropped to 47.8 in January from 49.1 in the previous month but was above the flash score of 47.5.

The U.K. services sector activity contracted less than expected in January, the final report from IHS Markit revealed.

U.S. Economic Reports

Private sector employment in the U.S. increased by much more than expected in the month of January, according to a report released by payroll processor ADP on Wednesday.

ADP said private sector employment jumped by 174,000 jobs in January after decreasing by a revised 78,000 jobs in December.

Economists had expected employment to rise by 49,000 jobs compared to the loss of 123,000 jobs originally reported for the previous month.

The Institute for Supply Management is scheduled to release its report on activity in the service sector in the month of January at 10 am ET.

The ISM’s services PMI is expected to edge down to 56.8 in January from 57.2 in December, although a reading above 50 would still indicate growth.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended January 29th.

Crude oil inventories are expected to inch up by 0.4 million barrels after tumbling by 9.9 million barrels in the previous week.

St. Louis Federal Reserve President James Bullard is scheduled to give a presentation on the U.S. economy and monetary policy before a virtual CFA Society St. Louis event at 1 pm ET.

At 2 pm ET, Philadelphia Federal Reserve President Patrick Harker is due to speak on “Education and Credentials” before a virtual “Uneven Outcomes in the Labor Market: Understanding Trends and Identifying Solutions” event.

Cleveland Federal Reserve President Loretta Mester is scheduled to participate in a moderated discussion before a virtual Council of Economic Education Economists on the Economy event at 5 pm ET.

Also at 5 pm ET, Chicago Federal Reserve President Charles Evans is due to speak on current economic conditions and monetary policy before the virtual Oakland University Economics Advisory Board 2021 Lecture Series.

Dallas Federal Reserve President Robert Kaplan is scheduled to participate in a moderated conversation on national and global economic issues before the virtual Global Perspectives series at 6 pm ET.

Stocks In Focus

Shares of Capri Holdings (CPRI) are moving sharply higher in pre-market trading after the parent of Michael Kors and other luxury brands reported fiscal third quarter earnings well above analyst estimates.

German biopharmaceutical company CureVac (CVAC) is also likely to see initial strength after announcing a collaboration with GlaxoSmithKline (GSK) to develop next generation coronavirus vaccines.

Shares of Amdocs (DOX) may also move to the upside after the software and services provider reported fiscal first quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Spotify (SPOT) are likely to come under pressure after the music streaming service reported a wider than expected fourth quarter loss.

Biotechnology company Biogen (BIIB) is also seeing pre-market weakness after reporting weaker than expected fourth quarter earnings and provided disappointing guidance.