Market Snapshot: U.S. stocks mostly lower despite tame inflation, with Powell speech awaited

United States

U.S. stocks were mixed in choppy trade Wednesday, a day after the Dow Jones Industrial Average and the S&P 500 snapped six-day winning streaks.

A report on U.S. inflation showed investors have little to worry about, for now, and gave a slight boost to stocks in early trade. The day’s schedule will also bring a speech by Federal Reserve Chairman Jerome Powell on the state of the labor market.

What are major benchmarks doing?
  • The Dow Jones Industrial Average DJIA, +0.08% was 44 points, 0.1%, higher, trading at about 31,420.
  • The S&P 500 SPX, -0.07% slipped 2 points, to about 3,910.
  • The Nasdaq Composite was lower by 50 points, or 0.4%, near 13,958.

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Stocks saw little movement Tuesday, with the Dow DJIA, +0.08% and S&P 500 SPX, -0.07% posting small losses to snap a six-day winning streak for both indexes, while the Nasdaq Composite COMP, -0.32% eked out a small gain to capture another record close. The small-cap Russell 2000 RUT, -0.54% outpaced its larger-cap siblings with a 0.4% gain to also post another record finish.

See: Is the stock market due for a correction in 2021? Here’s what some experts think

What’s driving the market?

Investors remain focused on prospects for another large round of government spending, as well as a slowing pace of new COVID-19 infections, along with the ongoing vaccine rollout. At the same time, market watchers are parsing consumer price inflation data for January published Wednesday morning.

The U.S. consumer price index rose 0.3% in January as expected, after climbing 0.4% a month earlier, but excluding volatile food and energy prices the core CPI was unchanged versus an expected increase of 0.1%. CPI inflation was up 1.4% in the past 12 months.

While the headline economic indicators aren’t showing evidence of inflation yet, commodities prices are, noted Andrew Smith, chief investment strategist at Dallas-based Delos Capital Advisors. Raw materials like oil CL.1, +0.39%, lumber WOOD, +0.93%, and corn C00, -3.10% have all shot higher over the past few months, and may start to pinch Americans’ pocketbooks soon, he said.

Even so, Smith told MarketWatch, “we think we’ve hit a good new stride in the market. Valuations are high in all corners of the market, but “we’re finally seeing earnings growth.”

In a separate report, the Census Bureau said wholesale inventories gained 0.3% in December.

“Investors are already trying to pre-empt when the U.S. economy will experience the inflation overshoot that’s expected to be driven by more incoming fiscal stimulus,” said Han Tan, market analyst at FXTM, in a note.

“Such conditions might trigger the much talked about Fed tapering, which may then pave the way for higher interest rates. More clues about that timeline would help global investors ascertain their allocations in equities versus bonds,” he said.

Investors were expected to pay little attention to the second impeachment trial of Donald Trump, with arguments set to get under way in the Senate on Wednesday afternoon. The Senate voted Tuesday that the trial could proceed after a round of arguments over the constitutionality of trying a former president.

The trial isn’t expected to affect financial markets since it isn’t seen interfering with a push toward another round of coronavirus aid spending. President Joe Biden is pushing for a $ 1.9 trillion package and Congressional Democrats have taken steps that would allow them to push through a spending plan without Republican support in the evenly divided Senate via a process known as budget reconciliation. The size of the plan is expected to shrink somewhat, however, due to resistance from some Democrats.

Powell is slated to deliver remarks to the Economic Club of New York at 2 p.m. Eastern, and federal budget figures for January are set for release at 2 p.m.

See: 24 bank stocks with dividends of at least 3.57%, three times what 10-year Treasurys pay

Which companies are in focus?
  • Shares of Coca-Cola Co. KO, +0.24% ticked 0.2% higher after delivering earnings and revenue Wednesday morning that topped Wall Street expectations.
  • Shares of Twitter Inc. TWTR, +9.09% surged midday after the social-media platform delivered its second-ever $ 1 billion quarter late Tuesday.
  • Cisco Systems Inc. CSCO, -4.02% late Tuesday reported quarterly results that topped Wall Street estimates, though sales in certain segments came in below expectations. Shares of the maker of network services, videoconferencing tools and security software slid 4.1%.
  • Mattel Inc. MAT, -3.76% shares fell 5% in late morning trade even after the toy maker topped Wall Street expectations for its fourth quarter and said it continued to be “mindful” of COVID-related “volatility and other macroeconomic uncertainties.”
  • Shares of Yelp Inc. YELP, -7.17% also reversed early gains to tumble nearly 6% despite reporting better-than-expected sales and earningslate Tuesday.
  • In deal news, shares of NIC Inc. EGOV, +16.45% jumped 15.9% after the digital government solutions and payments company agreed to be acquired by Tyler Technologies Inc. TYL, +6.77% in a $ 2.3 billion cash deal.
What are other markets doing?
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 1.141%  slid about 2 basis points to about 1.140%, after earlier eyeing a key threshold at 1.2%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index, DXY, -0.12%  a measure of the currency against a basket of six major rivals, fell 0.1% to about 90.37.
  • Oil futures rose in choppy trade, after a report showed lower stockpiles, with the U.S. benchmark CL.1, +0.39%  up 0.6% to $ 58.70 per barrel. Gold futures GC00, +0.02%  were 0.2% higher, near $ 1,841 an ounce.
  • The pan-European Stoxx 600 Europe index SXXP, -0.23%  and London’s FTSE 100 UKX, -0.08% both fell 0.2%.
  • In Asia, the Shanghai Composite SHCOMP, +1.43%  closed 1.4% higher, while Hong Kong’s Hang Seng Index HSI, +1.91% surged 1.9%, and Japan’s Nikkei 225 NIK, +0.19%   ticked up 0.2%.

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