By Will Horner and Paul Vigna
U.S. stocks wavered on Wednesday, another sign that investors
are taking a breather after pushing markets to record highs.
The Dow Jones Industrial Average slipped less than 0.1%, the
S&P 500 fell 0.2% and the Nasdaq Composite fell 0.7%. Both the
S&P 500 and the Dow closed lower on Tuesday after notching
record highs earlier in the week. The Nasdaq set another record
high, its 10th this year, on Tuesday.
Still, investors are betting that President Biden's $1.9
trillion stimulus package will help bolster the economy while
vaccinations help reduce Covid-19 fatalities. Investor sentiment
has also been buoyed by companies' quarterly results that have
largely proved to be better than expected.
"As long as earnings estimates are going up, stocks are going
up," said Andrew Slimmon, a managing director and portfolio manager
at Morgan Stanley Investment Management. "The magnitude of the
earnings beats we have seen are so great because earnings have been
way underestimated."
With nearly 70% of the S&P 500 already reporting
fourth-quarter earnings, profits for the group are up 5.1%, better
than an expected contraction of 9.2%, according to FactSet. That is
also a vast improvement from the third quarter's 5.6% profit
contraction. First-quarter earnings are expected to rise 21%.
Among big-name stocks, ride-hailing firm Lyft rose 5% after
posting a narrower annual loss, suggesting the company is moving
toward profitability. Rival Uber Technologies is among the
companies scheduled to release its results after the market closes.
Uber shares rose 3%.
Twitter jumped 9% after the social-media company said late
Tuesday that it added users through the holiday period.
Coca-Cola rose 0.4% after the soda giant said early Wednesday
that it expects its 2021 organic revenue to grow by a
high-single-digit percentage.
Cisco Systems, considered a proxy for corporate high-tech
hardware demand, fell 4.3% after its fiscal second-quarter revenue
and profit declined.
Shares of Oracle slipped 0.7%, and Walmart fell 1.2%. The Wall
Street Journal reported that a U.S. plan to force the sale of
TikTok's American operations to a group including the two companies
had been shelved indefinitely by the Biden administration.
U.S. inflation data, an important indicator of the health of the
economy, showed consumer prices posted slow and steady gains for
January.
"These will be given undue attention because we have gone
through an unprecedented period," Altaf Kassam, head of investment
strategy for State Street Global Advisors in Europe, said before
the data was released. "There are definitely some inflationary
signals in the background, but the inflation numbers we have seen
recently have been pretty soft."
Investors are concerned about whether rebounding consumer demand
and another sizable stimulus package could make inflation rise
steeply, or push the fiscal deficit too high, Mr. Kassam added.
"No one is worried about the size of the stimulus package, as
long as it is quite big," he said. "The challenges are more on
whether it is too big and whether you can have too much of a good
thing," he said.
Comments from Federal Reserve Chairman Jerome Powell, scheduled
for 2 p.m. ET, are also likely to be closely scrutinized for any
hints on the health of the economy and future moves on monetary
policy.
U.S. Treasury yields, which move inversely to the price, ticked
down to 1.147% after settling at 1.156% on Tuesday.
Overseas, the Stoxx Europe 600 edged up 0.3%.
In China, the Shanghai Composite advanced 1.4% to close at its
highest level since August 2015. This was its last trading day
before the Lunar New Year holidays. Distiller Kweichow Moutai, the
biggest stock in the index, leapt 5.9% to a record closing
high.
Optimism about China's economy, rising corporate earnings, and
global vaccine rollouts have helped lift market sentiment recently,
said Wei Wei Chua, a portfolio manager at Mirae Asset Global
Investments.
A rush of new mutual-fund launches, plus an increase in
individual investors buying stocks through mobile apps, had also
injected fresh money into the market, Mr. Chua added. "It is a
positive feedback loop and people don't really want to miss out
when the markets are doing well, " he said.
Hong Kong's Hang Seng Index rose 1.9% by the close of trading,
while Japan's Nikkei 225 gained 0.2%.
--Joanne Chiu contributed to this article.
Write to Will Horner at William.Horner@wsj.com and Paul Vigna at
paul.vigna@wsj.com
(END) Dow Jones Newswires
February 10, 2021 11:12 ET (16:12 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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