S&P 500 is flat after back-to-back rally, Alphabet and Amazon jump on strong earnings

The S&P 500 held steady on Wednesday following a strong two-day rally, as investors cheered strong earnings from Google’s parent Alphabet and Amazon.

The broad equity benchmark rose just 0.3% and the Dow Jones Industrial Average dipped 30 points. The tech-heavy Nasdaq Composite climbed 0.6%.

Shares of Alphabet surged more than 7% after the technology giant reported 23% revenue growth and topped estimates for earnings, boosted by Google’s recovering advertising business.

Amazon reported earnings nearly doubled Wall Street estimates, while delivering its biggest revenue of all time at $125.56 billion, pushing it past the symbolic $100 billion mark for the first time. The ecommerce leader also announced that Jeff Bezos was stepping down as CEO. Amazon’s stock traded 0.7% higher.

Stocks rallied for the second day on Tuesday, with the Dow Jones Industrial Average gaining more than 475 points for its best day since November. Investors returned to buying equities after the Reddit-fueled action that shook markets last week. The Dow is up over 2% this week.

The S&P 500 has climbed more than 3% this week, while the Nasdaq has jumped more than 4%.

“Short squeeze fears abate and contagion contained for now,” Maneesh Deshpande, head of equity derivatives strategy at Barclays, said in a note. “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.”

After a meteoric, albeit seemingly synthetic rise in GameStop last week caused by a short squeeze, shares have cratered more than 70% this week. Other Reddit trades have also come back down to Earth amid trading restrictions from major brokers. However, GameStop jumped 10% in volatile trading on Wednesday.

Investors are also monitoring negotiations in Washington surrounding another stimulus package. President Joe Biden met with the 10 Republican senators on Monday to discuss an alternative, smaller aid proposal to his $1.9 trillion package.

On the data front, private firms added 174,000 jobs in January, above the 50,000 Dow Jones estimate, according to a report Wednesday from payroll processing firm ADP.

Earnings season continues on Wednesday with chipmaker Qualcomm, eBay, PayPal and Yum China reporting after the closing bell.

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