US stocks fall despite moderate inflation, with Powell’s speech awaiting

Stocks saw little movement on Tuesday, with the Dow DJIA,
+ 0.07%
and S&P 500 SPX,
-0.13%
posting small losses to break a six-day winning streak for both indices, while the Nasdaq Composite COMP,
-0.22%
achieved a small gain to capture another record closure. The small-cap Russell 2000 RUT,
-0.17%
surpassed its larger capitalization brothers with a gain of 0.4% to also post another record.

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What is driving the market?

Investors remain focused on the outlook for another major round of government spending, as well as slowing the pace of new COVID-19 infections, along with the ongoing vaccine launch. At the same time, market watchers are analyzing consumer price inflation data for January, published on Wednesday morning.

The US consumer price index rose 0.3% in January, as expected, after rising 0.4% in the previous month, but excluding volatile food and energy prices, the CPI core remained unchanged against an expected increase of 0.1%. CPI inflation has risen 1.4% in the last 12 months.

While key economic indicators still show no evidence of inflation, commodity prices are, noted Andrew Smith, chief investment strategist at Delos Capital Advisors in Dallas. Raw materials like CL.1 oil,
+ 0.74%,
lumber,
+ 1.03%,
and C00 corn,
-2.97%
all have soared in the past few months and may start hurting Americans’ pockets soon, he said.

Still, Smith told MarketWatch, “We think we have achieved a new breakthrough in the market.” Although valuations are high in every corner of the market, “we are finally seeing an increase in profits,” he said.

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

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

“These conditions could trigger the so-called Fed tapering, which could pave the way for higher interest rates. More clues about this schedule 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 the arguments set to start in the Senate on Wednesday afternoon. The Senate voted on Tuesday that the trial could proceed after a round of arguments over the constitutionality of trying a former president.

The test is not expected to affect financial markets, as it is not interfering with the push for another round of spending on coronavirus aid. President Joe Biden is targeting a $ 1.9 trillion package, and Congressional Democrats have taken steps that would allow them to pursue a spending plan without Republican support in the equally divided Senate through a process known as budgetary reconciliation. The size of the plan is expected to shrink slightly, however, due to resistance from some Democrats.

Powell is due to comment to the New York Economic Club at 2 pm. East, and the federal budget figures for January are scheduled to be released at 2:00 pm.

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Which companies are in focus?

• Actions of Coca-Cola Co.
  KO,
  + 0.07%
  rose 0.3% after delivering earnings and revenue on Wednesday morning that exceeded Wall Street expectations.

• Actions of Twitter Inc.
  TWTR,
  + 7.77%
  increased at noon after the social media platform delivered its second quarter of $ 1 billion on Tuesday.

• Cisco Systems Inc.
  CSCO,
  -3.88%
  Last Tuesday released quarterly results that exceeded Wall Street estimates, although sales in certain segments were below expectations. The shares of the manufacturer of network services, videoconferencing tools and security software fell 4.1%.

• Mattel Inc.
  RUNNING MACHINE,
  -2.55%
  the shares fell 3.4% even after the toy maker exceeded Wall Street expectations for the fourth quarter and said it remained “aware” of “volatility and other macroeconomic uncertainties” related to COVID.

• Actions of Yelp Inc.
  YELP,
  -6.47%
  it also reversed initial gains to drop by almost 7%, despite reporting better-than-expected sales and profits on Tuesday.

• In business news, shares of NIC Inc.
  EGOV,
  + 16.10%
  jumped 16.2% after the digital government solutions and payments company agreed to be acquired by Tyler Technologies Inc.
  TYL,
  + 7.14%
  in a $ 2.3 billion cash deal.

What are other markets doing?

• The yield of the 10-year Treasury note TMUBMUSD10Y,
  1.138%
  it fell by about 2 basis points to around 1.140%, after previously observing a main limit 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 major rivals, fell 0.1% to around 90.38.

• Oil futures rose in hectic trading after a report showed lower stocks, with the US CL.1 benchmark,
  + 0.74%
  up 0.6% to $ 58.71 per barrel. GC00 future gold,
  + 0.31%
  were 0.2% higher, close to $ 1,839 an ounce.

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

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

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