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Stocks Mixed in Morning Trading After S&P 500's Record Close

By Joe Wallace 

U.S. stocks were mixed Tuesday, suggesting that the major indexes may pause after closing at record highs.

The S&P 500 edged 0.1% lower, after the benchmark gauge posted its eighth all-time closing high of 2021 on Monday. The technology-focused Nasdaq Composite Index rose 0.3%, while the Dow Jones Industrial Average fell 0.2%.

Investors said markets are taking a breather following a broad advance in stocks and commodities. The recent rally has been fueled by expectations of a new dose of stimulus spending in the U.S., which could add impetus to the economic revival. That has helped pare expectations for turbulence in U.S. stocks, sending the Cboe Volatility Index down this week to less than 22, after the gauge surged to over 37 at the end of January.

"Very small downsized moves are a symptom of low volatility," said Trevor Greetham, head of multiasset at U.K. investment firm Royal London Asset management. "Low and falling volatility is a bull market phenomenon. You do get quiet days."

Expectations that the economy will revive this year have prompted money managers to bet stocks will continue to power higher, driven by sectors such as energy, banks and consumer companies that are sensitive to growth.

"There is a big reflation trade on," Mr. Greetham added, saying stocks stand to benefit from the distribution of vaccines and the prospect of $1.9 trillion in additional stimulus.

He sees two main risks: New variants of coronavirus that push back the reopening of beaten-down sectors; and a burst of inflation that prompts a big rise in government-bond yields.

House Democrats released the biggest piece of their coronavirus relief bill late Monday, offering a measure that would extend a $400-a-week unemployment insurance payment through Aug. 29 and send $1,400 per-person payments to most households. It will be combined with pieces advancing through other House committees with the aim of getting through the full House later this month.

Money managers are also tracking the flurry of earnings releases from big American companies.

Twitter, ride-hailing firm Lyft and Cisco Systems are scheduled to publish earnings reports after markets close. Of the roughly 300 companies on the S&P 500 that had reported for the holiday quarter by early Tuesday, about 81% had beaten analysts' earnings expectations, according to FactSet.

Stocks have also received a boost from falling coronavirus infection rates, said Mr. Greetham. Newly reported coronavirus cases in the U.S. topped 86,000 for Monday, according to Johns Hopkins University, the second consecutive day with fewer than 100,000 cases.

Even after a banner start to 2021 for stocks and signs of froth in corners of the market, many investors remain bullish.

"I think what the market hasn't reflected yet is the potential upside or strength for the economy here in 2021," said Candice Bangsund, a portfolio manager at Fiera Capital. She thinks growth will accelerate as soon as the second quarter, boosting shares of oil producers, miners, banks and industrial companies.

Oil prices paused after their recent advance, which had been powered by shrinking supplies of crude and wagers by investors that vaccines and fiscal stimulus will boost demand. Brent-crude futures were down 0.3% at $60.36 a barrel.

In the bond market, the yield on 10-year Treasury notes ticked down to 1.145%, from 1.159% Monday.

Bitcoin jumped a 6.3% to $45,600, according to CoinDesk. The digital currency surged after Tesla said Monday it had bought $1.5 billion in bitcoin and planned to begin accepting it in payments, a move some analysts said could broaden acceptance of the currency.

Stocks also paused in Europe, where the pan-continental Stoxx Europe 500 slipped 0.2%.

In Asia, the Shanghai Composite Index ended the day 2% higher and Japan's Nikkei 225 rose 0.4% by the close.

--Amber Burton contributed to this article.

Write to Joe Wallace at Joe.Wallace@wsj.com

 

(END) Dow Jones Newswires

February 09, 2021 11:09 ET (16:09 GMT)

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