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

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Market Snapshot

Fed Chairman Jerome Powell

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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

    was 44 points, 0.1%, higher, trading at about 31,420.

  • The S&P 500

    slipped 2 points, to about 3,910.

  • The Nasdaq Composite was lower by 50 points, or 0.4%, near 13,958.

Need to Know: Stocks aren’t in a bubble, but here’s what is, according to ARK Invest’s Cathie Wood

Stocks saw little movement Tuesday, with the Dow

and S&P 500

posting small losses to snap a six-day winning streak for both indexes, while the Nasdaq Composite

eked out a small gain to capture another record close. The small-cap Russell 2000

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
and corn

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.

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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?
What are other markets doing?

Read next: These ‘sweet sixteen’ recovery stocks still have upside, according to Raymond James

Read full story

Barron’s: The Biden Stock Market Won’t Be Like the Trump Market. What to Expect.

Savita Subramanian, Bank of America’s widely followed strategist, points to opportunities in financials, energy, industrials, and health care.

William Watts is MarketWatch’s senior markets writer. Based in New York, Watts writes about stocks, bonds, currencies and commodities, including oil. He also writes about global macro issues and trading strategies. Before moving to New York, he reported for MarketWatch from Frankfurt, London and Washington, D.C.

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