U.S. Market Wrap and Forecast for Thursday

U.S. mega-tech stocks reported strong quarterly results overnight, generating mixed results, with Alphabet Inc. (GOOG) breaking out to an all-time high while investors ignored Amazon.Com Inc.’s (AMZN) blowout fourth quarter after CEO Jeff Bezos announced he was stepping aside. SP-500 index filled the Jan. 27 gap above 3,800 while Nasdaq-100 stalled at the .786 retracement of last week’s four-day decline. Chip stocks fell, dropping PHLX Semiconductor Index around 2%.

Wednesday Wrap-Up

The chip index reversed at the psychologically-sensitive 3,000 level, predicting weeks or more of consolidative price action.  Sector leaders could suffer as a result, entering rangebound patterns after big gains in 2020. Small cap short interest plays stabilized after Monday’s steep slide, with GameStop Inc. (GME) struggling to mount the 100 level. Recent hot rocket Blackberry LTD (BB) got closer to fair value, undercutting 12.00 after trading above 28 just five sessions ago.

Energy stocks gained ground, underpinned by WTI crude oil rallying above 55 for the first time since January 2020. U.S. energy funds moved in lockstep but are still underperforming futures, highlighting the divergence between production facilities and the super-charged commodity. Vaccine stocks recovered after Johnson & Johnson (JNJ) upset the playing field last week, lifting Moderna Inc. (MRNA) toward resistance above 170 after a three-day decline.

Looking Ahead to Thursday

The January ADP report came in stronger-than-expected, adding 174K jobs. This sets an optimistic tone ahead of Friday’s Non-Farm Payrolls report, which can be wildly inconsistent with this less important number. In any case, few market players really care about the U.S. labor situation in the middle of this winter’s second wave when all eyes are focused on the economic recovery expected in the second half of 2021.

SP-500 and Nasdaq-100 reversed within a few clicks of January highs and fell into the closing bell, consistent with rangebound price action as the market awaits more important catalysts. Thursday should be an interim session, sandwiched between Wednesday’s ADP and Friday’s NFP reports. As a result, it makes sense to expect mixed narrow range action while traders reduce exposure, reposition, and set up for expected volatility after the headline number.

For a look at all of today’s economic events, check out our economic calendar.