Stock futures rise slightly as Reddit mania unravels, Amazon and Alphabet report strong earnings

U.S. stock futures rose slightly in overnight trading on Tuesday, after a strong market rally as the Reddit trading mania continued to unwind.

Dow futures rose 27 points. S&P 500 futures and Nasdaq 100 futures also both traded in mildly positive territory.

Strong earnings from Amazon and Alphabet helped futures. Amazon reported earnings nearly double Wall Street estimates; however, the stock move was tempered by news that Jeff Bezos would step down as CEO. Amazon’s stock edged 0.3% higher in after hours trading.

Shares of Alphabet surged more than 7% in after hours trading after the technology giant reported 23% revenue growth and topped estimates for earnings.

Stocks rallied for the second day on Tuesday, with the Dow Jones Industrial Average gaining more than 475 points for its best day since November. Investors returned to buying equities after the Reddit-fueled action that shook markets last week. The Dow is up 2.35% this week.

The S&P 500 climbed 1.4% and the Nasdaq Composite jumped more than 1.5%.

After a meteoric, albeit seemingly synthetic rise in GameStop last week caused by a short squeeze, shares have cratered more than 70% this week. Other Reddit trades have also come back down to Earth amid trading restrictions from major brokers.

“The best way to describe today’s stock market action is ‘reversing the Reddit revolution,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. “What went up with GameStop, came down with GameStop.”

“From mid-day Jan. 28 to the end of Jan. 29, cyclicals including technology got pounded while defensive sectors outpaced. Over the last two days, and particularly today, this was reversed,” added Paulsen.

Investors are also monitoring negotiations in Washington surrounding another stimulus package. President Joe Biden met with the 10 Republican senators on Monday to discuss an alternative, smaller aid proposal to his $1.9 trillion package.

Earnings season continues on Wednesday with AbbVie, Biogen, Boston Scientific, GlaxoSmithKline and Humana reporting before the opening bell.

Chipmaker Qualcomm, eBay, PayPal and Yum China report earnings after the market closes on Wednesday.

Private payroll data from January is released at 8:15 a.m. on Wednesday from ADP. Economists polled by Dow Jones are expecting private sector jobs grew by 50,000 in January, compared to the loss of 123,000 in December.

Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.