U.S. Opening Bell: Futures, Shares Resume Rally On Earnings, Stability; Oil Higher

US futures contracts on the Dow, S&P, NASDAQ, and European stocks advanced for the third day in a row on Wednesday. Investors have grown confident in market stability after concerns that the volatility caused by the standoff between hedge funds and retail trader would topple the broader market. Earnings beats from Amazon and Google reinforced the positive outlook. 

However, Russell 2000 futures were trading in the red. Gold and the dollar rebounded.

Global Financial Affairs/h2

A strong earnings announcement from Alphabet (NASDAQ:GOOGL) on Tuesday after the market closed, which included a 42% increase in revenue and a 45% increase in earnings, was driven by its search engine and YouTube, as well as Google Cloud gaining momentum.

The Amazon (NASDAQ:AMZN) results earnings call included the news that founder and CEO, Jeff Bezos is stepping down, and Amazon Web Services CEO Andy Jassy, will be elevated to the top job in Q3.

The move suggests the world’s largest retailer might set its sight on overtaking Microsoft (NASDAQ:MSFT) as the world’s top cloud services provider. However, Bezos said he was stepping down to focus on new products and push along new initiatives, boasting that they have “things in the pipeline that will continue to astonish.” 

The current narrative is that the reflation trade is driving the market. Reflation trades typically comprise companies sensitive to economic cycles, which have underperformed during coronavirus lockdowns, that would benefit from economic stimulus. This group includes small caps, as well as energy and financials firms. However, the tech sector, which includes stocks that have excelled amid social restrictions, is actually leading the current reflation rally. 

Futures on the NASDAQ, up 0.6%, more than doubled the 0.3% advance of S&P 500 contracts, while contracts on the Russell 2000 were 0.3% in the red.

Yesterday, the NASDAQ 100 provided an upside breakout, completing a falling flag, targeting 14,000.

In Europe, the STOXX 600 Index climbed 0.9%, with all the major sectors in the green. Germany’s DAX gained 0.8% with Siemens (DE:SIEGn) jumping 1.8% after it surpassed first-quarter expectations and increased its outlook for 2021. The company recovered from the pandemic more quickly than anticipated.

Sales growth and positive guidance pushed Novo Nordisk (CSE:NOVOb) 3.2% higher. Volvo (ST:VOLVb) climbed 0.7% after beating its fourth-quarter estimates, brightening its outlook. The company also rolled out a large shareholder payout.

South Korea’s KOSPI was up 1.1% after regulators extended a ban on short selling to May 2, following the country’s Reddit version rebellion in which retail traders bought up the most shorted shares, including biopharmaceutical Celltrion (KS:068270). China’s Shanghai Composite fell 0.5% on profit taking of highly valued tech stocks, offsetting strong guidance for Chongqing Changan Automobile Co Ltd (SZ:000625).

US shares posted back-to-back gains on Tuesday as the retail trading hype ebbed away. Every sector was in positive territory, with financial and industrial firms driving the index higher, making the case for the cyclical trade.

United Parcel Service (NYSE:UPS) rose after reporting a surge in profits, and Exxon Mobile (NYSE:XOM) climbed on its promise to safeguard dividends. GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) crashed over 41% as speculative trading dissipated. Silver also fell from its eight year high.

Yields, including on the 10-year Treasury note were higher.

The move extended the upside breakout of a falling flag within a rising channel.

The dollar recovered from a dip.

The greenback simultaneously completed a H&S bottom and a bullish wedge.

Gold rebounded from the bottom of a rising flag, despite dollar strength.

The yellow metal struggled within a confluence of technical pressures —Death Cross amid the bearish flag, after it fell back into its falling channel, while it still might step up to a H&S bottom.

Silver completed a powerful, bearish evening star at the resistance of the August highs, while still within a rising channel since the December bottom.

A fall between the September and November low would complete a double top for the white metal.

Bitcoin formed an intraday shooting star on its third straight rise.

The cryptocurrency will complete a bullish flag, once the price clears the Jan. 29, much longer shooting star.

Oil extended an advance to the third day, completing a falling flag, like bitcoin. 

Up Ahead/h2

• The EIA crude oil inventory report is due Wednesday.
• On Thursday, the Bank of England and the Indian central bank set rates.
• The US January nonfarm payrolls report is due Friday, providing a first look at hiring in 2021.

Market Moves/h2

Stocks/h3

• Futures on the S&P 500 Index climbed 0.5%.
• The FTSE 100 Index was flat.
• The Stoxx Europe 600 Index gained 0.8%.
• The MSCI Asia Pacific Index advanced 0.9%.
• The MSCI Emerging Markets Index increased 0.6%.

Currencies/h3

• The Dollar Index was little changed at 91.16
• The British pound was little changed at $1.3669.
• The euro was little changed at $1.2039.
• The onshore yuan was little changed at 6.458 per dollar.
• The Japanese yen weakened 0.1% to 105.05 per dollar.

Bonds/h3

• Britain’s 10-year yield advanced two basis points to 0.373%.
• The yield on 10-year Treasuries gained two basis points to 1.12%.
• The yield on two-year Treasuries climbed less than one basis point to 0.12%.
• Germany’s 10-year yield jumped three basis points to -0.46%.
• Japan’s 10-year yield increased less than one basis point to 0.058%.

Commodities/h3

• West Texas Intermediate crude gained 0.8% to $55.20 a barrel.
• Brent crude gained 1% to $58.05 a barrel.
• Gold weakened 0.1% to $1,835.88 an ounce.
• Silver rose 0.8% to $26.91 an ounce.