By Will Horner and Caitlin McCabe 

U.S. stocks closed higher after struggling to find direction for most of the day.

All three major U.S. indexes tumbled after the opening bell, with the Dow Jones Industrial Average falling more than 200 points, before paring losses.

By mid-afternoon, after signs emerged that lawmakers were willing to engage in stimulus talks, the S&P 500 and Dow Jones Industrial Average jumped into positive territory. The blue-chip index as of the 4 p.m. close of trading in New York was about 60 points higher, rising 0.2%. The S&P 500 also rose 0.2%, setting a fresh closing record.

The Nasdaq Composite, meanwhile, dropped less than 0.1%.

Both the S&P 500 and the Nasdaq notched records Tuesday.

The market has been propelled higher in recent weeks by optimism that Covid-19 vaccines will help accelerate the economic rebound. That has led to a jump in stocks that are sensitive to economic growth, including energy and banks and recently helped the Dow vault above 30000 for the first time.

On Wednesday, however, much of that momentum moderated, even after the U.K. granted emergency-use authorization for a Covid-19 vaccine developed by Pfizer and BioNTech. Public health experts expect that a similar authorization in the U.S. could come later this month.

"That's exciting but that was also expected," Chris Konstantinos, chief investment strategist at RiverFront Investment Group, said of the U.K.'s green light of the vaccine. "We're in a bit of an information vacuum. We're through earning season and now the market is kind of waiting until the end of the year and watching vaccine news and stimulus news."

Still, investors say they are optimistic about the equity markets in the months ahead as they anticipate a strong economic recovery once swaths of the population are vaccinated in the U.S. next year. The Federal Reserve's commitment to providing sustained stimulus has also extended investors' risk appetite.

"Why would you be a seller of stocks when you know that policy support, both fiscal and monetary, is there and probably will be there going forward?" said Derek Halpenny, head of research for global markets in the European region at MUFG Bank. Stocks are likely to continue rallying in coming weeks, despite valuations that appear to be stretched, he added.

On Wednesday, small signs that U.S. lawmakers were willing to engage in negotiations over a new coronavirus-aid package helped stocks trim their early-morning losses, some traders said. But the likelihood of stimulus remains uncertain. U.S. lawmakers this week reignited talks for coronavirus relief packages, with House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin discussing measures by phone for the first time since the election.

Among the biggest winners in Wednesday's market were shares of energy companies, with Apache rising 8.1% and Occidental Petroleum jumping 6.1%, which came as crude oil prices jumped 1.8%. Oil prices have rallied recently on vaccine optimism, though this week's meeting of the Organization of the Petroleum Exporting Countries and its partners to decide on production policy could help determine the direction of the market.

Bank stocks also rallied Wednesday, while Pfizer added 2.9% after its U.K. government approval.

At the same time, Salesforce.com tumbled 8.5%. The cloud-computing company on Tuesday confirmed that it had agreed to buy Slack Technologies for $27.7 billion.

Tesla fell 4.3%. On Monday, S&P Dow Jones Indices said it would add Tesla's full weight to the S&P 500 all at once later this month.

Even with the potential for vaccine distribution on the horizon in the U.S., traders are still contending with an economy that remains deeply wounded and uncertainty surrounding whether fresh coronavirus lockdowns will be implemented once President-elect Joe Biden takes office in January.

Traders will be paying close attention later this week to fresh jobs report figures. The ADP National Employment Report on Wednesday showed that job creation in the private sector slowed last month. About 307,000 new nonfarm jobs were created, marking a drop from October and less than economists had been forecasting.

Meanwhile, testimony from Federal Reserve Chairman Jerome Powell and Mr. Mnuchin about government support for the economy continued for another day on Wednesday. Lawmakers on Tuesday pressed Mr. Mnuchin over his decision not to renew a suite of emergency Federal Reserve lending programs. The Fed has said it would prefer the lending programs remain in place until the risks posed to the economy by the pandemic has subsided.

In bond markets, the yield on the 10-year Treasurys jumped to 0.954%, from 0.933% on Tuesday.

Overseas, the Stoxx Europe 600 edged down slightly. Conflicting reports about the status of the talks between the European Union and the U.K. on a post-Brexit trade deal led to choppy trading in the region.

In Asia, the major stock indexes ended trading on a muted note. Japan's Nikkei 225 closed almost flat, while the Shanghai Composite Index and Hong Kong's Hang Seng Index slid roughly 0.1%.

Write to Will Horner at William.Horner@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com

(END) Dow Jones Newswires

December 02, 2020 16:21 ET (21:21 GMT)

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