ARNC Arconic Corporation

By Joseph Adinolfi and Sara Sjolin, MarketWatch

Fed's Beige Book to grab the spotlight

U.S. stocks wavered early Wednesday, moving in and out of positive territory as they struggled to build on a blistering rally that has pushed the S&P 500 and Dow industrials to record closing levels.

The Dow Jones Industrial Average pared modest opening gains to trade up 14 points, or less 0.1% at 18,363. Gains in the shares of tech stalwarts International Business Machines Corp.(IBM) and Microsoft Corp. were counterbalancing a 1.2% decline in Home Depot Inc. (HD), while the S&P 500 index was flat at 2,153, pressured by declines in energy and consumer-discretionary stocks.

The Nasdaq Composite Index rose slightly, up 7 points, or 0.1%, at 5,029.

The wobbly start comes after an upbeat trading day on Wall Street on Tuesday, when the S&P 500 and Dow both rose 0.7% to close at record highs (http://www.marketwatch.com/story/sp-500-poised-for-fresh-record-as-alcoa-spurs-earnings-optimism-2016-07-12), supported by a rally in energy shares and stronger-than-expected earnings from Alcoa Inc.(AA)

Overall, market strategists and investors remained fairly optimistic about the outlook for equities.

The economic uncertainty caused by Brexit has been a key driver of the recent push to record levels, as the expectation of economic disruption in Europe and the U.K. pushes investors into the U.S., said Mohannad Aama, managing director at Beam Capital Management.

And while economic and financial fundamentals may not justify further gains, record-low sovereign bond yields and a cautious Federal Reserve will likely keep values elevated as investors have fewer better alternatives, Aama added.

"All these factors push you into U.S. stocks and it's unclear what was the hair that broke the camel's back that made us break through this S&P level, he said. "But for now, it looks like we have a few more points to go."

However, some strategists raised concerns about the fact that the recent rally has been led by defensive plays like utilities and telecom shares.

"Usually, market rallies driven by defensive sectors don't tend to last very long. We need to see leadership by sectors like financials or technology to really count on this rally having legs," said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.

Economic news: With few prominent earnings on tap for Wednesday, attention is turning to Federal Reserve news: the Beige Book survey of current economic conditions is due at 2 p.m. Michael Hewson, chief market analyst at CMC Markets, said the report could reinforce the view that the U.S. economy is doing well and "in so doing start to shift the dial in terms of the timing of a potential U.S. rate rise."

"While a July and September rate rise would seem out of the question given current global concerns a decent survey won't deter some Fed members from rattling the prospect of a rise in rates, even if they know they won't be able to deliver one," he said in a note.

In other economic news on Wednesday, U.S. import prices climbed 0.2% in June. Investors are also looking ahead to the Federal budget for the same month, which is due at 2 p.m.

Fed speakers: On Wednesday, Dallas Fed President Rob Kaplan was sanguine about the outlook for the U.S. consumer, speaking at an event run by the World Affairs Council of Greater Houston.

On Tuesday, St. Louis Fed President James Bullard reiterated his view of only one rate increase until 2018, and Minneapolis Fed President Neel Kashkari said there's "not a huge urgency to raise rates because inflation is coming up low."

At 6 p.m. Eastern, Philadelphia Fed President Harker will give a speech on the economic outlook at the 2016 World Class Summit in Philadelphia.

Movers and shakers: Shares of Juno Therapeutics Inc.(JUNO) rallied 24% after the drugmaker late Tuesday said it would resume a drug trial (http://www.marketwatch.com/story/juno-shares-jump-after-clinical-trial-of-cancer-treatment-resumed-2016-07-12) of a potential leukemia treatment. The trial had been placed on clinical hold last week following two patient deaths.

SemiLEDS Corp.(LEDS) tanked 14% after the LED chips maker late Tuesday said third-quarter revenue slumped 18% and that is loss widened to $3.3 million.

Amazon.com Inc.(AMZN) shed 0.7% even after Benchmark lifted the price target on the stock to $915 from $750.

After the market closes, Yum! Brands Inc.(YUM) is slated to report earnings (http://www.marketwatch.com/story/what-to-expect-from-yum-brands-earnings-2016-07-12).

Other markets: Asian stocks closed mostly higher, but were off intraday highs after the Japanese government denied it would use "helicopter money" (http://www.marketwatch.com/story/asian-markets-gain-but-off-highs-after-japan-says-no-helicopter-money-coming-2016-07-13) to boost the economy.

Europe's main stock benchmark rose for a fifth straight session (http://www.marketwatch.com/story/european-stocks-aiming-higher-for-a-fifth-consecutive-session-2016-07-13), getting closer to erasing its entire post-Brexit loss.

Oil prices slumped (http://www.marketwatch.com/story/crude-prices-back-off-ahead-of-possible-supply-rise-2016-07-13), while gold inched higher. The dollar was down against (http://www.marketwatch.com/story/dollar-slips-after-japan-rules-out-helicopter-money-2016-07-13) other major currencies.

(END) Dow Jones Newswires

July 13, 2016 10:22 ET (14:22 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.