The Dow made a positive start to the week Monday, as the spike in volatility that rattled markets in the final days of January subsided after investor focus shifted to another busy week of quarterly results.
Investor sentiment on stocks returned following a rocky end to the week last month as intensity of the retail-led short-squeeze eased, pushing the VIX – the so-called fear index – down more 9%.
GameStop (NYSE:GME) slumped 31% as retail investors shifted efforts to Silver Futures, squeezing short sellers of the metal. Silver Futures prices rose 9% to a more than eight-year high. But there is growing uncertainty as to whether the bid higher in the metal was driven by retail investors on social media forum Reddit, or by hedge-funds. Famed-subreddit “wallstreetbets” appeared to distance itself from the trade, which appears to be mainly driven by bullish calls on the metal from subreddit “Wallstreetsilver.”
The other popular short-squeeze stocks were mostly lower.
Tech led the broader market with the Fab 5 leading to the upside.
Amazon.com (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), both of which report earnings later this week, were up more 4 and 3% respectively. Microsoft (NASDAQ:MSFT) was up 3%, while Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) were up more than 1%.
Apple reportedly plans to sell six-part $14 billion bonds, taking advantage of cheap borrowing rates with a view to returning more cash to shareholders, Bloomberg reported, citing unknown sources.
The fourth quarter of earnings is shaping up to be one of the strongest on record, with the roll out of vaccines and easing pandemic impact also helping to improve visibility.
Overall, 37% of the companies in the S&P 500 have reported results for Q4 2020, with about 82% reporting EPS above estimates, which is above the five-year average of 74%, the company said.
“If 82% is the final percentage for the quarter, it will mark the second-highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008,” FactSet said.
Energy stocks, meanwhile, turned positive on rising oil prices as Saudi Arabia started to cut production by 1 million barrels a day, following its pledge to do so last month in order to offset production increases by Russia and Kazakhstan.
Focus on stimulus effort were also renewed as a group of ten Republican Senators reportedly proposed a more targeted, but significantly lower $600 billion stimulus package to President Joe Biden. That is well below the president’s $1.9 trillion stimulus package proposal.
“Reentering stimulus discussions appears to be giving equities a welcome boost as the stock market tries to reset after its worst week since October,” Stifel said in a note.