Stocks closed modestly higher on Wall Street Wednesday as investors turn their focus to some strong earnings reports from Big Tech companies and hopes for getting more economic stimulus passed in Washington.
Investors also continue to watch shares of companies such as GameStop and AMC Entertainment, which have been targets of a community of online investors seeking to push them higher at the expense of hedge funds who bet the stocks would fall.
The S&P 500 rose 0.1%. Google’s parent company, Alphabet, jumped after reporting a blowout quarter as its digital advertising machine regained momentum. Treasury yields rose.
It’s a technology-heavy week for earnings. After the closing bell, investors will get results from technology giant Cisco Systems as well as payments behemoth PayPal.
Meanwhile shares of Amazon rose just 0.2%, despite the company reporting a huge rise in quarterly profits. Amazon also said its founder and CEO Jeff Bezos would be stepping down as CEO to focus on broader work at the company.
With Democrats and Republicans remaining far apart on support for President Joe Biden’s $1.9 trillion stimulus package, investors are betting that the administration will opt for a reconciliation process to get the legislation through Congress.
GameStop and other recently high-flying stocks were up modestly. GameStop rose 12.1% and AMC added 19.1%. The stocks have been caught up in a speculative frenzy by traders in online forums who seek to inflict damage on Wall Street hedge funds that have bet the stocks would fall.
GameStop plunged 60% to $90 a share on Tuesday, and AMC Entertainment lost 41.2% to $7.82. Both companies have been in the spotlight for more than two weeks as investors pushed the stocks to astronomical levels.
“There’s a tug of war that’s been brewing for a week or so now, that markets are ripe for a correction and whether the events of last wee are a precipitating event,” said Jamie Cox, managing partner at Harris Financial Group.
Treasury Secretary Janet Yellen has called for a meeting with the Securities and Exchange Commission, Federal Reserve Board and others to discuss the recent volatility in markets.
GameStop, whose shares have traded mostly on investor opinion instead of actual company news, announced it was hiring Matt Francis, formerly an engineering leader with Amazon Web Services, to the newly created role of chief technology officer.
Investors also had some economic reports to work through. A gauge of the service sector, where most Americans work, came in at its highest level in almost two years last month. The measure published by the Institute for Supply Management climbed to 58.7% in January, up a full percentage point from the previous month.
Meanwhile a report on private sector hiring by payroll data company ADP showed employers hired 174,000 workers in January, which was much better than economists expected.
The vaccine rollout is also becoming more organized and picking up steam.
“That’s very supportive of markets,” Cox said. “The events that will determine the outcome of 2021 are obviously how fast to we reach a point where the world can operate and function more normally.”
Energy companies rose as the price of crude oil jumped 1.5%. Exxon Mobil rose 3.3% and Schlumberger gained 5.6%.
The yield on the 10-year Treasury rose to 1.12% from 1.09% late Tuesday.