Another wobbly day on Wall Street ended with the major stock indexes mostly lower, though the Dow Jones Industrial Average inched up to another all-time high.
The S&P 500 slipped less than 0.1% after swinging between a gain of 0.5% and a loss of 0.7%. Nearly 60% of the companies in the benchmark index rose, though a slide in technology stocks and companies that provide consumer services and products kept those gains in check.
Treasury yields fell after a government report showed that inflation remained tame last month.
The muted market action follows a string of record highs for the major stock indexes. Investors have been encouraged by surprisingly good company earnings reports, indications that a recent surge in new coronavirus cases is easing, progress in the distribution of vaccines and signs that lawmakers in Washington are moving toward delivering another financial boost for the economy.
“We're sort of catching our breath after the surge we had last week,” Sam Stovall, chief investment strategist at CFRA.
The S&P 500 dropped 1.35 points to 3,909.88. The Dow rose 61.97 points, or 0.2% to 31,437.80. The Nasdaq lost 35.16 points, or 0.3%, to 13,972.53. The Russell 2000 index of small companies fell 16.56 points, or 0.7%, to 2,282.44.
The Labor Department said Wednesday that U.S. consumer prices rose 0.3% in January, led by a surge in energy. Even though the gain was the biggest monthly increase since July, inflation over the past year has remained relatively low, up a modest 1.4%. Core inflation, which excludes volatile food and energy costs, is also up 1.4% with core prices unchanged in January.
The report was encouraging for investors because it suggests the U.S. economy will be able to receive more stimulus without overheating.
“Generally, the market has seen a very favorable backdrop and that likely remains the case going forward,” said Sal Bruno, chief investment officer at IndexIQ. “Inflation remains benign and there’s still going to be a pretty big stimulus package going forward.”
The yield on the 10-year Treasury note fell to 1.13% from 1.15% late Wednesday. It was as a high as 1.20% earlier this week.
Investors have started watching inflation metrics more closely as Democrats in Congress prepare to inject $1.9 trillion of stimulus into the economy. U.S. businesses are starting to reopen and millions of Americans are now vaccinated, meaning there could be a surge of economic activity and therefore potential inflation. Before Wednesday’s report, Treasury yields had been climbing steadily for weeks, which is typically a sign that investors expect both the economy to get better and for inflation to increase.
“Consumer price inflation remains very tame,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.
Investors continued to monitor the latest company earnings reports. Twitter and Under Armour jumped 13.2% and 8.3%, respectively, after delivering quarterly report cards that were much better than analysts were expecting. Twitter became the latest tech giant to report strong results despite the pandemic.
Energy companies made some of the broadest gains as oil prices edged higher, adding to a roughly 12% gain so far in February. Devon Energy rose 4.6% and Hess gained 2.1%.
Cannabis stocks surged as members of the same online forum that hyped up GameStop, AMC Entertainment and other beaten-down companies in recent weeks began encouraging each other to snap up shares in marijuana companies.
Canadian cannabis company Sundial Growers vaulted 78.8%. The stock is up more than 500% so far this year. Shares in Aphria and Tilray, Canadian companies that agreed to combine in December, also rose. Aphria gained 10.7%, adding to its 280% gain this year, while Tilray jumped 50.9%. It's up more than 670% this year.
Marijuana stocks had been surging before becoming the latest darling of online investors as more states moved last year to allow legal sales. The stocks are also benefiting from optimism that industry friendly legislation measures could become law under the Biden administration. Last week, Democratic leaders in the Senate reiterated their intention to move on comprehensive cannabis reform in the current legislative session.
“At least in this case there's either momentum or fundamentals underpinning a move like this,” Stovall said. “At the same time, you wonder if it's simply another form of speculation.”
Shares in GameStop and AMC Entertainment, which have been recently pulling back sharply from their runup at the end of January, rose 1.8% and 5.5%, respectively.
AP Economics Writer Martin Crutsinger contributed to this report from Washington.