US stocks fall despite tame inflation, with Powell’s speech expected

Stocks were little moved on Tuesday, with the Dow DJIA,
+ 0.07%
and S&P 500 SPX,
-0.12%
posting small losses to break a six-day streak for both indices, while the Nasdaq Composite COMP,
-0.18%
eked a little gain to capture another near record. The Russell 2000 RUT small cap,
-0.12%
edged out its larger-cap siblings with a 0.4% gain to also post another record.

See: Should the stock market undergo a correction in 2021? Here’s what some experts think

What drives the market?

Investors remain focused on the prospects of another significant round of government spending, as well as the slowing rate of new COVID-19 infections, as well as the ongoing deployment of the vaccine. At the same time, market watchers are analyzing consumer price inflation data for January released on Wednesday morning.

The U.S. Consumer Price Index rose 0.3% in January as expected, after rising 0.4% a month earlier, but excluding volatile food and energy prices, the Core CPI remained unchanged from an expected increase of 0.1%. The rise in the CPI rose 1.4% over the past 12 months.

While major economic indicators do not yet show evidence of inflation, commodity prices are, noted Andrew Smith, chief investment strategist at Dallas-based Delos Capital Advisors. Raw materials such as CL.1 oil,
+ 0.70%,
WOODEN WOOD,
+ 1.03%,
and corn C00,
-2.92%
have all climbed higher in recent months and may soon begin to nip Americans’ wallets, he said.

Regardless, Smith told MarketWatch, “We believe we have taken another important step in the market.” As valuations are high in all corners of the market, “we are finally seeing earnings growth,” he said.

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

“Investors are already trying to anticipate when the US economy will experience the inflation overrun that is expected to be driven by further fiscal stimulus,” Han Tan, market analyst at FXTM, said in a note.

“Such conditions could trigger the much talked about Fed tapering, which could then pave the way for a hike in interest rates. More indices on this timeline would help global investors determine their allocations to stocks versus bonds, ”he said.

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

The trial is not expected to affect financial markets, as it is not seen as interfering with a new wave of coronavirus aid spending. President Joe Biden is aiming for a $ 1.9 trillion package, and Congressional Democrats have taken steps that would allow them to pass a spending plan without Republican backing in an equally divided Senate through a process known as of budget reconciliation. The size of the plan is, however, expected to decrease somewhat due to resistance from some Democrats.

Powell is expected to speak to the Economic Club of New York at 2 p.m. EST, and federal budget figures for January are expected to be released at 2 p.m. ET.

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

Which companies are targeted?

• Actions of Coca-Cola Co.
  KO,
  + 0.02%
  rose 0.3% after generating profits and revenue Wednesday morning that exceeded Wall Street expectations.

• Actions of Twitter Inc.
  TWTR,
  + 7.88%
  surged at noon after the social media platform delivered its $ 1 billion second quarter on Tuesday night.

• Cisco Systems Inc.
  CSCO,
  -3.82%
  On Tuesday night, quarterly results beat Wall Street estimates, although sales in some segments were lower than expected. The manufacturer’s shares of network services, video conferencing tools, and security software fell 4.1%.

• Mattel Inc.
  CARPET,
  -2.33%
  shares fell 3.4% even after the toy maker beat Wall Street expectations for its fourth quarter and said it continued to be “aware” of “volatility and other related macroeconomic uncertainties to COVID ”.

• Actions of Yelp Inc.
  JAPPER,
  -6.57%
  also reversed early gains to fall nearly 7%, despite better-than-expected sales and results on Tuesday.

• In business news, the actions of NIC Inc.
  EGOV,
  + 16.14%
  jumped 16.2% after the digital government payments and solutions company agreed to be acquired by Tyler Technologies Inc.
  RETURN,
  + 6.90%
  in a $ 2.3 billion cash transaction.

What are other markets doing?

• The yield of the 10-year Treasury bill TMUBMUSD10Y,
  1.137%
  slipped around 2 basis points to around 1.140%, after previously observing a key level of 1.2%. Bond yields and prices move in opposite directions.

• The ICE US Dollar index, DXY,
  -0.12%
  a measure of the currency against a basket of six big rivals, fell 0.1% to about 90.38.

• Oil futures rose in volatile trade, after report showed stocks falling, with US benchmark CL.1,
  + 0.70%
  up 0.6% to $ 58.71 per barrel. GC00 Gold Futures,
  + 0.29%
  were 0.2% higher, nearly $ 1,839 per ounce.

• The pan-European Stoxx 600 Europe SXXP index,
  -0.23%
  loses 0.2% and London’s FTSE 100 UKX,
  -0.11%
  fell 0.1%.

• In Asia, the Shanghai Composite SHCOMP,
  + 1.43%
  closed 1.4% higher, while the Hong Kong Hang Seng HSI Index,
  + 1.91%
  jumped 1.9% and Japan’s Nikkei 225 NIK,
  + 0.19%
  increased by 0.2%.

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