By Mark DeCambre
U.S. stocks closed mostly lower Wednesday, but the Dow Jones Industrial Average booked its third straight record close, after minutes from the Federal Reserve’s January meeting showed officials were skeptical about the economy improving enough to warrant removing monetary stimulus any time soon.
The release of central bank minutes capped a series of economic reports that showed a healthy economy, along with some signs of rising inflation.
How did stock benchmarks perform?
The Dow Jones Industrial Average (DOW:DJIA) gained 90.27 points, 0.3%, to close at 31,613.02.
The S&P 500 index (S&P:SPX) lost 1.26 points to reach 3,931.33, a decline of less than 0.1%.
The Nasdaq Composite (NASDAQ:COMP) gave up 82 points, or 0.6%, to close at 13,965.49.
On Tuesday , the Dow ended at a record, but the S&P 500 and the Nasdaq Composite indexes snapped a two-day string of gains to end lower.
What drove the market?
Fed policy makers reiterated that they want to see sustained inflation before they even consider ending their bond-buying program and start to raise interest rates, January meeting minutes confirmed.
The Fed update came after data showed U.S. retail sales jumped 5.3% in January, crushing estimates, after a 1% decline in December as COVID cases spiked.
A separate report on industrial production from the Federal Reserve showed a rise of 0.9% in January, also trouncing economist forecasts of a 0.5% gain. Businesses restocked their inventories more than expected in December, but a reading on home-builder confidence was stronger than expected.
However, the producer-price index jumped by 1.3% in January, the largest monthly increase since the index underwent a major overhaul in 2009 and service prices were included in the report. The rate of wholesale inflation in the past 12 months climbed to 1.7% from 0.8% at the end of 2020—not far from the pre-pandemic level of 2%.
Good recent economic data has been helping to boost U.S. bond yields, as investors look ahead to the prospect of more fiscal stimulus from Congress and declining coronavirus cases . On Tuesday, the 10-Treasury note (XTUP:BX:TMUBMUSD10Y) hit a yield near 1.30%, its highest level since Feb. 26, according to Dow Jones Market Data.
“The retail sales numbers were stunning, and PPI was very very strong too, but we’ve had a series of down months before that,” said Peter Andersen, founder of Boston-based Andersen Capital Management. “It’s just too hard to extrapolate based on one month. It could show pent-up demand but the supply demand dynamic right now is still too hard to filter. I’m thinking it could show what the pent-up demand is once we get through the vaccine roll-out. We’ll be off to the races.”
In an interview with MarketWatch, Andersen said he was “really shocked at the attention that investors are giving to shiny items like bitcoin, space exploration, SPACs.” The market could use a little direction from more news about vaccine progress, he said, but overall, other than a few frothy areas, isn’t worrisome.
Greg Marcus, managing director, UBS Private Wealth Management, said the explanation for this week’s choppiness is a bit more straightforward: “Even though rates are picking up, they’re still low,” he said. “Markets came a little too far too fast.”
Once the vaccine rollout hits its stride, Marcus told MarketWatch, the rest of the year “could feel like New Year’s Eve every day. I still believe that there’s so much money on the sidelines and consumers have saved so much money and they’re waiting to go spend money again.” He’s bullish on small- and mid-cap stocks, as well as emerging-market names.
Meanwhile, frigid weather is posing problems in much of the U.S., including Texas, leaving millions without power and nearly 75% of the Lower 48 states under snow cover, The Wall Street Journal reported, citing the National Oceanic and Atmospheric Administration’s National Snow Analysis daily report. The freezing weather cut U.S. oil production and helped to push up prices.
Which stocks were in focus?
Shares of Verizon Communications Inc. (NYS:VZ) rose 5.4%, and Chevron Corp. CVX rallied 3% to pace the Dow after Warren Buffett’s Berkshire Hathaway Inc. BRK.B disclosed that it acquired large stakes in the companies during the fourth quarter.
Canadian cannabis company Sundial Growers Inc . SNDL filed a shelf registration with the Securities and Exchange Commission to issue up to $1 billion of securities over time. Shares slid more than 21%.
Medical device maker Medtronic PLC (NYS:MDT) said Wednesday it is v oluntarily recalling unused Valiant Navion thoracic stent graft system and informing doctors to immediately stop using the device until further notice. Shares slipped 1.3%.
Energy Transfer LP (NYS:ET) announced Wednesday an agreement to buy Enable Midstream Partners LP (NYS:ENBL) in a stock deal valued at $7.2 billion.
Shares of Analog Devices Inc. (NAS:ADI) were lower after the chip maker beat on earnings expectations and hiked its dividend.
Shares of Hilton Worldwide Holdings Inc. (NYS:HLT) lost 2.2%Wednesday, after the hotel operator reported a surprise fourth-quarter loss and revenue that fell more than forecast, as the rise in COVID-19 cases and tightening travel restrictions disrupted the positive momentum seen in the summer and fall.
Shopify Inc. (NYS:SHOP) shares fell 3.3% despite better-than-expected quarterly results.
What did other assets do?
The yield on the 10-year Treasury note (XTUP:BX:TMUBMUSD10Y) slipped nearly 2 basis points to 1.296%.
The ICE U.S. Dollar Index (IFUS:DXY) , a measure of the currency against a basket of six major rivals, was up 0.5%.
Oil futures edged higher as energy disruptions continued throughout the country , with the U.S. benchmark (NYM:CL.1) up 1.9% to settle at $61.14 a barrel, holding above the key $60 level.
Gold futures (NYM:GC00) slumped 1.5% to settle at $1,772.80 as bond yields surged. the lowest finish since late June and a fourth-straight down day.
The pan-European Stoxx 600 index (STOXX:XX:SXXP) closed 0.7% lower and London’s FTSE 100 stock index UKX lost 0.6%.
Markets in Hong Kong (HONG:HK:HSI) closed 1.1% higher, while Japan’s Nikkei 225 index NIK shed 0.6%.