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As the Reddit-fueled frenzy slows down, investor confidence in the broader market seems to be restored again thanks to the tech giants like Amazon and Alphabet whose earnings report suggests phenomenal growth during Q4 2020.
The US stock market remained upbeat on Wednesday, February 3, as the S&P 500 ended in green for the third day in a row. This broad equity benchmark closed 0.1% higher at 3,830.17 levels.
Investors have been keenly watching the corporate earnings report of big tech giants this week. Google’s parent company Alphabet Inc (NASDAQ: GOOGL) kept investors’ optimism high as the tech giant reported a massive 23% growth. Also, Google‘s advertising business has shown a strong recovery giving the much-needed fuel to its stock.
YouTube alone showed 47% growth over last year with a surge in its direct-response ads. “Our direct-response business on YouTube was practically non-existent three years ago. Now, it’s one of our largest and fastest-growing ad offerings on YouTube,” said Philipp Schindler, Google’s chief business officer. The advertising revenue for Q4 2020 stood at $46.20 billion, up 22% from $37.93 billion in Q4 2019.
On Wednesday, the GOOGL stock price surged 7.28% up closing at $2058 levels with a market cap of $1.40 trillion. Alphabet’s adjusted earnings stood at $22.30 per share against the expected $15.90 per share.
Google’s phenomenal report comes just a day after Amazon.com Inc (NASDAQ: AMZN) reported its largest quarterly revenue for Q4 2020. For the last quarter, Amazon registered $125 billion in sales recording a massive 44% over Q4 2019. However, the e-commerce giant announced that current CEO Jeff Bezos will step down by the third quarter of this year. This led to a 2% drop in the AMZN stock on Wednesday.
S&P 500 in Green Boosted by Improving Employment Data
Analysts remain optimistic about the recovery in the US in the coming months. Mike Loewengart, managing director of investment strategy at E-Trade Financial, told CNBC:
“Under the surface there is an economy regaining serious momentum. When matched with stellar earnings reports from big tech names this week, along with a reinvigorated vaccine push and COVID cases dropping across the US, a positive full picture is emerging.”
On the other hand, investors also remained upbeat on the improvement in the US employment data last month. On Wednesday, payroll processing firm ADP noted that over 174,000 jobs were added in January 2021. This was nearly 3 times the Dow Jones estimate of 50,000 new jobs. Wall Street has shown solid strength after all the frenzy around Reddit-fueled stocks fizzled out.
The S&P 500 (INDEXSP: .INX) has surged 3% so far this week. The Dow Jones has surged 2.5% this week while the Nasdaq Composite has surged 4% this week. It looks like the investor confidence in the broader market is restoring back. Maneesh Deshpande, head of equity derivatives strategy at Barclays, said:
“Short squeeze fears abate and contagion contained for now. Despite the relatively strong blowout in these names, on an aggregate level the subset of short squeeze stocks impacted continues to be a negligible fraction of the U.S. equity market.”
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