US stocks are falling despite moderate inflation, pending a speech from Powell

Shares saw little movement Tuesday, with the Dow DJIA,
+ 0.06%
and S&P 500 SPX,
-0.13%
recording small losses to achieve a six-day winning streak on both indices, while the Nasdaq Composite COMP,
-0.19%
Made a small profit to close another record. The small-cap Russell 2000 RUT,
-0.10%
outperformed his bigger-cap siblings with a 0.4% gain to set another record as well.

See: Is the stock market due for a correction in 2021? This is what some experts think

What drives the market?

Investors remain focused on the prospects for another major round of government spending, as well as a declining rate of new COVID-19 infections, along with the ongoing rollout of vaccines. At the same time, market observers are analyzing consumer price inflation data for January released Wednesday morning.

The US consumer price index rose 0.3% in January, as expected, from an increase of 0.4% a month earlier, but excluding volatile food and energy prices, the core CPI was unchanged from an expected increase of 0.1%. CPI inflation has risen 1.4% over the past 12 months.

While key economic indicators show no evidence of inflation yet, commodity prices are, said Andrew Smith, lead investment strategist at Delos Capital Advisors in Dallas. Raw materials such as oil CL.1,
+ 0.70%,
lumber WOOD,
+ 1.03%,
and maize C00,
-2.92%
have all shot higher in recent months and could soon start squeezing Americans’ wallets, he said.

Still, Smith told MarketWatch, “We think we’ve taken a good new step in the market.” While valuations are high in every corner 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 spike expected to be driven by more incoming fiscal stimulus,” Han Tan, market analyst at FXTM, said in a note.

“Such conditions could lead to the much-discussed Fed tapering, which could then pave the way for higher interest rates. More clues about that timeline would help global investors determine their equity versus bond allocations, ”he said.

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

The trial is not expected to impact financial markets as it is not seen as an impediment to another round of coronavirus relief spending. President Joe Biden is aiming for a $ 1.9 trillion package, and Democrats in Congress have taken steps that would allow them to push through a spending plan without Republican backing in the equally divided Senate through a process known as budget reconciliation. However, the size of the plan is expected to shrink somewhat due to resistance from some Democrats.

Powell will deliver a comment to the Economic Club of New York at 2:00 p.m. Eastern, and the federal budget figures for January will be released at 2:00 p.m.

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

Which companies have the focus?

• Shares of Coca-Cola Co.
  KO,
  + 0.03%
  ticked up 0.3% after delivering earnings and sales that exceeded Wall Street’s expectations Wednesday morning.

• Shares of Twitter Inc.
  TWTR,
  + 8.03%
  boomed the afternoon after the social media platform posted its second-quarter-ever $ 1 billion in late Tuesday.

• Cisco Systems Inc.
  CSCO,
  -3.78%
  Late Tuesday reported quarterly results surpassing Wall Street estimates, although sales fell below expectations in certain segments. Shares of the maker of network services, video conferencing tools and security software fell 4.1%.

• Mattel Inc.
  MAT,
  -2.33%
  stocks fell 3.4%, even after the toy manufacturer exceeded Wall Street expectations for the fourth quarter, saying it was still “aware” of COVID-related “volatility and other macroeconomic uncertainties.”

• Shares of Yelp Inc.
  YELP,
  -6.49%
  also reversed early gains, falling nearly 7% despite reporting better than expected sales and gains on Tuesday.

• In deal news, shares of NIC Inc.
  EGOV,
  + 16.18%
  jumped 16.2% after the digital government solutions and payments company agreed to be acquired by From Tyler Technologies Inc.
  BACK,
  + 6.90%
  in a $ 2.3 billion cash deal.

What are other markets doing?

• The return of the 10-year treasury TMUBMUSD10Y,
  1.137%
  shifted about 2 basis points to about 1.140%, after previously viewing a key threshold of 1.2%. Yields and bond prices move in opposite directions.

• The ICE US Dollar Index, DXY,
  -0.11%
  a measure of the currency against a basket of six major rivals, fell 0.1% to about 90.38.

• Oil futures rallied in troubled trading after a report showed lower stocks, with US benchmark CL.1,
  + 0.70%
  Up 0.6% to $ 58.71 a barrel. Gold futures GC00,
  + 0.29%
  were 0.2% higher, almost $ 1,839 an ounce.

• The pan-European Stoxx 600 Europe index SXXP,
  -0.23%
  lost 0.2% and the London FTSE 100 UKX,
  -0.11%
  decreased 0.1%.

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

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