By Joe Wallace and Amber Burton
U.S. stocks turned slightly higher Tuesday in a day of low
volatility as major indexes paused after closing at record highs
Monday.
The S&P 500 edged less than 0.1% higher, after the benchmark
gauge posted its eighth all-time closing high of 2021 on Monday.
The Dow Jones Industrial Average rose 0.1%, or 36 points. The
technology-focused Nasdaq Composite Index rose 0.3%.
If the S&P 500 and the Dow close lower on Tuesday, it will
mark their first down day in more than a week.
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.
The second impeachment trial of former President Donald Trump is
beginning Tuesday with House Democratic impeachment managers
alleging Mr. Trump incited an insurrection at the Capitol.
Investors say the trial doesn't weigh heavy on their outlook.
"It doesn't really play into our thinking that much," said Eric
Freedman, chief investment officer at U.S. Bank Wealth Management.
"I do think one of the big questions that we have heading into the
rest of this year that is somewhat related is how much policy room
does the Biden administration have."
Mr. Freedman said he is keeping an eye on whether the
proceedings will lead to entrenched positions from Democrats and
Republicans and what that would mean for future policy.
Despite the market's upward trajectory in recent days, he is
keeping in mind potential risks such as an unexpected increase in
interest rates and any challenges to producing or distributing the
Covid-19 vaccines.
Stocks that have been at the center of a social-media frenzy,
including GameStop and AMC Entertainment Holdings, continued to
tumble. GameStop fell 16%. AMC fell 12%.
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.
Carrier Global dropped 5.5% after the air conditioning firm
announced an earnings miss. Take-Two Interactive Software,
publisher of "Grand Theft Auto" and "Mafia: Definitive Edition,"
dropped about 6% despite forecast-busting earnings late Monday.
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 0.5% at $60.89 a barrel.
In the bond market, the yield on 10-year Treasury notes ticked
down to 1.145%, from 1.159% Monday.
Bitcoin jumped more than 4% to $46,700, 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 0.1%.
In Asia, the Shanghai Composite Index ended the day 2% higher
and Japan's Nikkei 225 rose 0.4% by the close.
Write to Joe Wallace at Joe.Wallace@wsj.com and Amber Burton at
Amber.Burton@wsj.com
(END) Dow Jones Newswires
February 09, 2021 13:20 ET (18:20 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.