Yesterday’s close was a sloppy one. After various feeble attempts at bounces throughout the afternoon, the S&P 500 (SPX) closed just above its low with a loss of 0.99%. Then, shortly after the final bell rang, Amazon (AMZN) came riding to the market’s rescue. Apple (AAPL) results didn’t hurt either, nor did a 10:1 split in Netflix (NFLX). Thus, we recovered a good portion of yesterday’s drop this morning.
Considering that yesterday’s broad market decline was triggered by a $15.9 billion non-cash loss at Meta Platforms (META) that led to a double-digit decline in that stock’s price, traders welcomed a solid performance from AMZN. The enthusiasm was less about the solid earnings beat ($1.95 vs $1.58 estimate) than the reason for it. Amazon Web Services revenues rose 20% over the prior year, which was above analysts’ expectations for an 18% rise. The company also estimates that its Rufus chatbot will help deliver an additional $10bn in annual sales.
It is not unfair to say that the current bull market is largely predicated upon enthusiasm for, and massive spending on, artificial intelligence. Therefore, any tangible benefits that can be shown to arise from that spending will be richly rewarding. AMZN stock rose by more than 12% at its peak, adding about $300 billion to the company’s market capitalization. That seems like a rich reward from the market, no?
That said, the enthusiasm for all things non-AMZN seems to be fading. SPX was up by about 0.8% at the open, dipped, then recovered to a nearly 0.7% gain by 11AM EDT. But shortly after noon, the index was barely above the unchanged level. Even the strongest of Amazons has a difficult time propping up an entire market.
On a different note, changes to market displays will be in effect on Monday. The complete outline is here: CTA_Round_Lot_Changes_FAQ.pdf. I urge curious readers to consult that fact sheet for a full explanation. A simplified explanation is:
- Quote sizes will be rounded down to the nearest multiple of the round lot size assigned to the security instead of representing the number of round lots available at the quoted price. This should be subtle.
- There will be a new definition of a round lot. Currently, a round lot is 100 shares for all stocks below $1,000. Starting Monday, stocks priced between $250.01 and $1,000 will have a round lot defined as 40. This might prove a bit more confusing to some.
Considering that many popular stocks are priced around $250 — including AAPL, AMZN, GOOGL, and more – this will require a change in how one thinks about a displayed quote. If there is a bid for, say, 320 shares and the stock is below $250, that will be rounded down to 300; if the stock is over $250, it will be 320 (8 x 40). It will be fascinating to see how the quotes might gyrate as a stock crosses above and below that threshold.
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