Closing Stock Market SummaryThe stock market finished relatively unchanged on Wednesday, even though Alphabet (GOOG 2070.07, +142.50, +7.4%) and Amazon (AMZN 3312.53, -67.47, -2.0%) reported exceptional earnings results. The S&P 500 (+0.1%), Nasdaq Composite (unch), and Dow Jones Industrial Average (+0.1%) closed little changed, while the Russell 2000 gained 0.4%.
Alphabet shares deservedly surged 7% after the company crushed EPS estimates, but so did Amazon and its shares fell 2%. Presumably, AMZN shares were pressured by an unexpected announcement that Jeff Bezos will step down as CEO and transition into Executive Chair in the third quarter.
Price action at the index level was relatively muted throughout the day, as the market appeared to grow tired legs after a strong two-day rally.
The S&P 500 communication services sector climbed 2.1%, largely due to Alphabet's influence and a trickle-down effect on other ad-based companies. The energy sector advanced the most with a 4.3% gain amid a lingering reopening optimism. Crude futures ($55.70, +0.93, +1.7%) settled above $55.00/bbl.
The consumer discretionary (-0.8%), health care (-0.7%), real estate (-0.4%), and information technology (-0.3%) sectors were on the losing end of the action.
In the health care space, AbbVie (ABBV 106.95, +3.48, +3.4%) and Biogen (BIIB 263.25, -14.47, -5.2%) trended in opposite directions following their earnings reports. GW Pharma (GWPH 211.37, +65.12, +44.5%) agreed to be acquired by Jazz Pharmaceuticals (JAZZ 151.21, -6.08, -3.9%) for about $7.2 billion in cash and stock.
Separately, the ISM Non-Manufacturing Index rose to 58.7% in January (consensus 57.0%) from an upwardly revised 57.7% (from 57.2%) in December. The ADP Employment Change report estimated that 174,000 jobs were added to private-sector payrolls in January (consensus +55,000) following an upwardly revised 78,000 decline (from -123,000) in December.
The better-than-expected economic data continued to suggest the economy is heading in the right direction, which contributed to continued selling interest in longer-dated Treasuries. The 10-yr yield increased three basis points to 1.13%, and the 2-yr yield was flat at 0.11%. The U.S. Dollar Index decreased 0.1% to 91.13. The CBOE Volatility Index dropped 10.4% to 22.91 amid decreased hedging interest.
Reviewing Wednesday's economic data:
- The ISM Non-Manufacturing Index rose to 58.7% in January (consensus 57.0%) from an upwardly revised 57.7% (from 57.2%) in December. The dividing line between expansion and contraction is 50.0%. The January reading is the highest since February 2019 and reflects a pickup in the pace of expansion from December.
- The key takeaway from the report is the recognition that the pace of activity in the services sector accelerated in January despite the surge in coronavirus cases, the political tumult, and shutdown measures aimed at curbing the spread of the coronavirus.
- The ADP Employment Change report estimated that 174,000 jobs were added to private-sector payrolls in January (consensus +55,000) following an upwardly revised 78,000 decline (from -123,000) in December.
- The IHS Markit Services PMI for January was revised higher to 58.3 from 57.5 in the preliminary reading.
Looking ahead, investors will receive the preliminary Q4 readings for Productivity and Unit Labor Costs, weekly Initial and Continuing Claims, and Factory Orders for December on Thursday.
- Russell 2000 +9.4% YTD
- Nasdaq Composite +5.6% YTD
- S&P 500 +2.0% YTD
- Dow Jones Industrial Average +0.4% YTD