The S&P 500 closed at a new all-time high Thursday, boosted by earnings from Facebook and Apple released the day prior. More broadly, the US indices have enjoyed an upbeat earnings season thus far, most recently in the form of Amazon which sailed past analyst estimates. Amazon shares quickly jumped 5% on the news and the positive reaction could help buoy price action in the Nasdaq 100 and S&P 500 as the week draws to a close.

AMAZON EARNINGS SAIL PAST ESTIMATES

Amazon was the latest tech behemoth to report an outstanding quarter as it easily surpassed estimates on both the top and bottom lines. In addition to solid revenue and earnings per share figures, Amazon recorded its highest growth rate since 2011 and more than tripled its quarterly profit. Now, the online retailer will have to show recent successes are not exclusive to the coronavirus pandemic period as consumers return to brick and mortar competitors. Should Amazon maintain its elevated market share in the quarters to come, further price gains could be in store.

In the shorter-term, strong earnings and a subsequent boost to its share price may allow Amazon to shore up weaknesses elsewhere – like Twitter which met expectations but sank more than 9% on disappointing guidance.

WILL SEASONAL HEADWINDS SLOW PRICE GAINS?

Already, an upbeat earnings season has allowed the S&P 500, Dow Jones and Nasdaq 100 to remain near all-time highs despite rather uninspiring price action in recent weeks. With the majority of earnings reports released, US indices may fall prey to seasonal market conditions that could see price action dry up and progress slow further.

S&P 500 SEASONALITY PRICE CHART

Either way, earnings from the big tech companies have undoubtedly bolstered sentiment and helped to justify their valuations which many investors have identified as “frothy,” to say the least. That being said, strong earnings and a committed Federal Reserve may allow such valuations to persist or even extend under the current market conditions.

As a result, the building blocks for a continuation rally have been laid and it is largely up to the market to decide the next major move as the underlying corporations and economy continue to do their part.