Amazon's $126 Billion Quarter

By Nicholas Jasinski | Tuesday, February 2

Positivity. Stocks rallied today, as a batch of strong earnings reports (more on that below) and continued signs of progress on the stimulus and Covid-19 fronts helped boost sentiment. Meanwhile, a social media-driven rally in GameStop and other speculative stocks appeared to have run out of steam.

The S&P 500 surged 1.4%, adding to yesterday’s 1.6% gain. The index ended last week down 3.3%, and had lost more like 5% from the week’s intraday peak to trough. The Dow Jones Industrial Average and the Nasdaq Composite both closed up 1.6% today.

Despite the parade of earnings reports, macro forces appear to have control of the market lately, with all 11 S&P 500 sectors moving in lockstep for the past five sessions straight—down, up, down, up, and up again. That's the longest streak since the volatile (and decidedly macro-driven) 13-day stretch in March 2020.

This week, the macro news has at least been incrementally positive. The passage of a bipartisan fiscal stimulus and coronavirus-relief bill doesn’t appear imminent, but a $600 billion Republican counterproposal to President Joe Biden’s $1.9 trillion package presents a starting point in negotiations. Democrats may also proceed by passing the bill through a process known as reconciliation, which wouldn’t require any Republican votes.

The consensus among investors and economists seems to be that there will be another round of stimulus sooner rather than later, but with the exact size and contents still up in the air. For now, that appears to be good enough.

U.S. Covid-19 cases and hospitalizations have continued their downward trend, with both daily figures returning to levels last seen in November in recent days. Vaccination progress remains slower than many had hoped for at this stage, but the U.S. nonetheless just crossed the symbolic milestone of having more people vaccinated than had been confirmed infected with Covid-19 since the start of the pandemic. And with additional vaccines from Johnson & Johnson and Novavax on the horizon, supply should ramp in the coming months.

As for shares of several of last week’s short-squeeze rocket ships, many burned up on re-entry today. GameStop closed down 60% after falling more than 30% on Monday, AMC Entertainment dropped 41%, and BlackBerry lost 21%.

Momentum works in both directions: After catapulting by triple digits last week, GameStop stock is down more than 80% from its intraday high last Thursday.

DJIA: +1.57% to 30,687.48
S&P 500: +1.39% to 3,826.31
Nasdaq: +1.56% to 13,612.78

The Hot Stock: Waters +8.4%
The Biggest Loser: Vertex Pharmaceuticals -6.2%

Best Sector: Financials +2.4%
Worst Sector: Health Care +0.3%