Stock Market Today

Stock Market Today: Alphabet, Growth Names Add More Fuel to the Rally

Earnings beats by Google's parent company, as well as other technology and communications stocks, helped lift the major indexes Wednesday.

So far, so good in February's early days, as Wednesday's session saw stocks continue their recent rebound on the back of encouraging corporate earnings.

The day started off with a potential blow to the nascent rally: ADP reported that private payrolls dropped by 301,000 in January – a huge whiff from estimates for 200,000 and the first decline since December 2020.

"The details of the ADP employment report indicate a large and likely temporary drag from omicron on January employment," say Goldman Sachs Economics Research strategists. "We continue to expect a 250,000 decline in nonfarm payrolls in Friday's report."

However, "expectations for the January jobs data have ratcheted lower due to the recent omicron wave," says New York Stock Exchange Senior Market Strategist Michael Reinking, which could explain the market's lack of a reaction to the downbeat news.  Reinking adds that small businesses accounted for half of the overall job losses.

Rather, investors were more interested in the earnings calendar.

Alphabet (GOOGL, +7.5%) made a splash by announcing a 20-for-1 stock split that, if approved, would take place in July. Moreover, the tech giant easily eclipsed Wall Street estimates for fourth-quarter income and revenue, thanks to a strong performance and upbeat outlook in search.

Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

"We expect search to continue to gain relevance as commerce continues to shift to omnichannel," says Wedbush analyst Ygal Arounian, noting that GOOGL remains the firm's favorite large-cap stock.

Match Group (MTCH, +5.3%) and Advanced Micro Devices (AMD, +5.1%) also helped propel Wednesday's session with Street-beating results of their own.

The S&P 500 led the major indexes with a 0.9% gain to 4,589, while the Dow Jones Industrial Average (+0.6% to 35,629) and Nasdaq Composite (+0.5% to 14,417) also closed higher.

stock chart for 020222

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 didn't join its larger-cap brethren, declining 1.0% to 2,029.
  • U.S. crude oil futures posted a modest gain to settle at $88.26 per barrel after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to increase output by an additional 400,000 barrels in March – in line with their previously outlined plan.
  • Gold futures edged up 0.5% to finish at $1,810.30 an ounce.
  • Bitcoin did not join the markets in their rally, declining 2.4% to $37,606.65. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • It was a bruising session for PayPal Holdings (PYPL), which plunged 24.6% after earnings. While the digital payments company reported better-than-expected revenue in its fourth quarter ($6.92 billion actual vs. $6.87 billion expected), adjusted earnings per share of $1.11 fell short of the $1.12 per share anticipated. PYPL also projected current-quarter earnings of 87 cents per share, well below analysts' consensus estimate of $1.16 per share, and said revenue is likely to grow at a slower-than-expected pace in fiscal 2022. This soft forecast comes amid eBay's (EBAY, -3.2%) challenging migration to its own payments processor and other factors like inflation negatively impacting cross-border payments, according to PayPal CEO Dan Schulman. PYPL's really bad day spread to other fintech stocks, with Block (SQ, -10.6%) and Shopify (SHOP, -10.0%) also ending the day solidly in the red.
  • Under Armour (UAA) rose 2.7% today after Morgan Stanley analyst Kimberly Greenberger upgraded the athletic apparel and footwear maker to Overweight from Equalweight (the equivalents of Buy and Hold, respectively). "Current trading levels suggest the market 1) may have unfairly penalized UAA's stock for holiday weakness in specialty retail without considering its differentiated model and product exposure, and 2) may not recognize the opportunity for positive 2022 earnings per share revisions," the note says. As such, Under Armour could be poised for a first-half outperformance relative to its sportswear peers. On Tuesday, UBS analyst Jay Sole reiterated his Buy rating on UAA, saying its "turnaround story continues." Sole expects Under Armour to turn in a solid earnings beat when it reports earnings the morning of Friday, Feb. 11, which he believes will "boost sentiment" on the stock. 

Can Growth Pick Up the Slack?

The market's weak start to 2022 is partly due to the underperformance of the growth investing style, which relies on many of the S&P 500's biggest companies. But at least the beginnings of a shift are starting to appear.

"Both Apple (AAPL) and Microsoft (MSFT) are performing well after their earnings releases last week, with both stocks regaining much of their losses from the first few weeks of 2022," says David Keller, chief market strategist for financial charting platform StockCharts.com.

He adds that, in the short term, this week's reports from Alphabet, Facebook (FB) and Amazon.com (AMZN) could be pivotal in where the broader market goes from here.

Heading into the new year, most picks for the best stocks for 2022 came from the value camp. And thus far that investing style has lived up to its promise, with value outperforming growth by nearly 9 percentage points. However, strong returns from the aforementioned mega-caps offer reassuring signs that growth stocks still have life in them.

UBS analysts, for example, say growth stocks' year-to-date weakness affords investors a prime opportunity to buy high-upside stocks on the cheap. These 15 growth investing names in particular look like bargains, notes UBS.

Most Popular

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!
estate planning

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!

Upstream basis planning is a trust strategy that can save wealthy people on their capital gains taxes and income taxes associated with highly apprecia…
July 3, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
5 Ways to Prepare for a Recession
recession

5 Ways to Prepare for a Recession

The signs seem to be pointing in one direction these days, so if you’re worried about being ready for a recession, consider taking these five measures…
June 28, 2022

Recommended

Stock Market Today (7/1/22): Stocks Catch a Second Wind to Start Second Half
Stock Market Today

Stock Market Today (7/1/22): Stocks Catch a Second Wind to Start Second Half

Despite a dour ISM manufacturing index reading Friday, stocks broadly managed to pull themselves together and finish well in the black.
July 1, 2022
Is the Stock Market Closed for the Fourth of July in 2022?
Markets

Is the Stock Market Closed for the Fourth of July in 2022?

Independence Day falls on a Monday in 2022, so the bond and stock markets will enjoy a long holiday weekend. Here's a look at the markets' holiday hou…
July 1, 2022
Stock Market Today (6/30/22): S&P Suffers Worst First Half Since 1970
Stock Market Today

Stock Market Today (6/30/22): S&P Suffers Worst First Half Since 1970

The major indexes produced a familiar result Thursday, finishing in the red to close out a dreary first six months of the year.
June 30, 2022
Can AI Beat the Market? 10 Stocks to Watch
stocks

Can AI Beat the Market? 10 Stocks to Watch

An artificial intelligence (AI) system identifying high-potential equities has been sharp in the past. Here are its 10 top stocks to watch over the ne…
June 30, 2022