Stocks were mixed on Wednesday, with the Dow reaching a fresh record high after new data showed retail sales surged at the fastest clip since June at the start of the year. The Nasdaq underperformed as tech stocks lagged during the session.
Retail sales surged at a 5.3% monthly rate in January, coming in well above the rise of 1.1% consensus economists had expected, and ending a three-month streak of declining monthly sales.
"The 5.3% month-over-month surge in retail sales in January completely smashed our own and the consensus expectation of a more modest 1% gain and highlights how quickly reopenings and the $600 stimulus checks have translated into stronger spending," Michael Pearce, Capital Economics senior economist, said in a note. "That said, with the stimulus checks spent more quickly that we had expected, we expect retail sales to fall back in February."
Meanwhile, shares of Chevron (CVX), E.W. Scripps & Co. (SSP) and Verizon (VZ), the parent company of Yahoo Finance, jumped after Warren Buffett's Berkshire Hathaway disclosed new stakes in each of the companies. Bitcoin prices (BTC-USD) rocketed above $51,000, after breaking above $50,000 for the first time ever on Tuesday.
Markets over the past month have priced in the likelihood that additional, significant fiscal stimulus will help propel the economic recovery and work alongside ongoing monetary stimulus from the Federal Reserve. The yield on the benchmark 10-year Treasury note hit a one-year high of about 1.31% on Tuesday, amid hopes of a firming economy.
West Texas intermediate crude oil prices (CL=F) added to gains after settling above $60 per barrel for the first time since January 2020 on Tuesday, as new supply concerns compounded with optimism over a post-pandemic resurgence in demand for travel and fuel. Domestic oil output has slumped by nearly one-third due to freezing temperatures in Texas, Bloomberg reported on Tuesday.
As stocks continue to set fresh record highs, some strategists have warned that markets may need to take a breather before moving higher later this year.
"We still believe the market is ripe for a pullback, but the focus should remain on our core fundamental thesis and the global reflation theme," Cannacord Genuity strategist Tony Dwyer said in a note Tuesday. "The macro backdrop and market action coming off the March 2020 low continues to track the gains coming out of the Great Financial Crisis [of 2009], which means corrections may be coming followed by even more gains."
Even still, others noted that those with a longer-term investment horizon may benefit most by staying the course.
"It's always a nervous situation for investors when markets keep making new highs, and certainly there is froth in some parts of the market. But the question around the stimulus, the roll-out of the vaccines, all of these factors that go into the price in the stock market, ultimately it boils down to when will the economy recover to pre-pandemic levels, and when will earnings get to those levels as well," James Liu, Clearnomics founder and CEO, told Yahoo Finance.
"Right now, consensus estimates are that by the end of 2021, we should see a case where we get to about $170 in S&P earnings, which is essentially getting back to where we began pre-pandemic. And if that's the case, then it does justify some of the enthusiasm we have in the stock market today," he added. "That's a little bit different than saying the stock market will keep going up in a straight line. Obviously, that's probably not the case. But it is a reason for most everyday investors to basically stay diversified and stay invested despite the all-time highs."
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4:03 p.m. ET: Dow adds 91 points, or 0.3%, to close at a record high after retail sales rise by the most in 7 months; Nasdaq retreats as tech falls
Here were the main moves in markets as of 4:03 p.m. ET:
Gold (GC=F): -$25.00 (-1.39%) to $1,774.00 per ounce
10-year Treasury (^TNX): +0.2 bps to yield 1.3010%
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12:54 p.m. ET: Reddit user 'Roaring Kitty' sued for securities fraud after helping incite GameStop surge
Keith Gill, known on some social media platforms under the username "Roaring Kitty," was named in a securities class action lawsuit for claiming to be an amateur investors and using sites including Reddit to massively inflate the price of GameStop shares. Gill was one of the most prominent traders touting GameStop on Reddit's r/wallstreetbets forum last month. He is also scheduled to testify before the House Financial Services Committee on Thursday in a hearing about the surge in GameStop and other speculative stocks.
"In order to disguise that the aim of his social-media campaign was simply to increase the worth of his GameStop shares by creating a demand for the stock, Gill took on the fake persona of an amateur, everyday fellow, who simply was looking out for the little guy," according to the complaint, which was filed in Massachusetts on Tuesday. "He exaggerated and misrepresented the prospects of GameStop and made bold predictions about its future.
The complaint said that Gill obscured the fact that he held "extensive securities licenses and qualifications, including a securities principal and supervisory management license and a Chartered Financial Analyst license."
"Gill's deceitful and manipulative conduct not only violated numerous industry rules and regulations, but also various securities laws by undermining the integrity of the market for GameStop shares," according to the filing.
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12:25 p.m. ET: Stocks hold lower, Nasdaq sheds more than 1% as tech shares give back gains
The three major indexes remained lower intraday on Wednesday as tech stocks underperformed. The Nasdaq dropped 1.3% and paced for its worst day so far in February.
The S&P 500 also slipped from a recent record high, as the information technology, industrials and materials sectors lagged. Shares of Apple slid more than 2%, making it the worst-performing stock in the Dow and offsetting a more than 4% jump in shares of Verizon.
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10:01 a.m. ET: Homebuilder sentiment unexpectedly rose in February
Homebuilder confidence unexpectedly ticked higher in February as a boom in housing market activity continued well into the start of this year, even as concerns over affordability and rising rates loom.
The National Association of Home Builders' monthly builder sentiment index increased to 84 in February from 83 in January. This topped estimates for an unchanged reading for the month.
Going forward, however, home construction may retreat after a 2020 surge.
“Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021,” NAHB chief economist Robert Dietz said in a statement.
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9:30 a.m. ET: Stocks open lower
Here's where markets were trading shortly after the opening bell:
S&P 500 (^GSPC): -24.62 points (-0.63%) to 3,907.97
9:15 a.m. ET: Industrial production jumped by 0.9% in January, topping estimates for 0.4% rise
U.S. industrial output increased at a 0.9% month-over-month clip in January, the Federal Reserve said Wednesday, with this metric decelerating by less than expected compared to December as momentum in the manufacturing sector's recovery held up strongly.
Industrial output was expected to rise by just 0.4% in January, according to Bloomberg consensus data. December's industrial production was downwardly revised to a 1.3% monthly increase, from the 1.6% reported previously.
Capacity utilization, measuring the total proportion of facilities in use, jumped to 75.6% in January, also topping estimates for 74.8% and increasing over December. This compared to 76.93% in February of 2020, before the start of the pandemic.
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8:35 a.m. ET: Producer prices jumped by a record 1.3% in January, versus 0.4% rise expected
Producer prices jumped 1.3% in January over December, following a 0.3% rise during the prior month. This handily topped estimates for a rise of 0.4%, according to Bloomberg consensus data. It was also the fastest monthly rate of increase since the producer price index series began in December 2009.
Excluding more volatile food and energy prices, the producer price index (PPI) was still up 1.2%, or better than the 0.2% anticipated.
Over last year, producer prices rose 1.7%, or nearly double the 0.9% estimate. Excluding food and energy prices, producer prices were up 2.0%, versus 1.1% expected.
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8:30 a.m. ET: Retail sales surged 5.3% in January, versus 1.1% jump expected
Retail sales rose at a 5.3% monthly clip in January, the Commerce Department said Wednesday, following a drop of 1.0% in December. This was much faster than the 1.1% rise expected, according to Bloomberg consensus data. And it marked the fastest growth in monthly retail sales since June 2020.
The jump came as sales at department stores, electronics and appliance stores, and non-store retailers reversed December declines. Department stores sales surged 23.5%, but were still down 3.0% year-over-year. Non-store retailers, a proxy for e-commerce sales, jumped 11% in January and surged by 28.7% year-over-year.
Overall, retail sales were 7.4% higher than January 2020, extending a streak of year-over-year growth that began over the summer.
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7:57 a.m. ET: Shopify 4Q results handily top estimates, but outlook suggests 2021 revenue slowdown
Shopify (SHOP) posted fourth-quarter results that sailed above expectations, as the pandemic drove another surge in e-commerce demand in the final months of 2020. However, shares fell about 2% in early trading after the company suggested growth would moderate this year.
Fourth-quarter revenue nearly doubled over last year to $977.7 million, coming in well above the $910.4 million expected, according to Bloomberg consensus data. Adjusted earnings of $1.58 per share were also strongly ahead of the $1.21 expected.
However, Shopify suggested that its growth would retreat from 2020's record clip this year, as the vaccine rollout allows more in-person businesses to reopen.
"We expect that we will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020," the company said in a statement. "While we expect that the first quarter will likely still contribute the smallest share of full-year revenue and the fourth quarter the largest, the revenue spread may be more evenly distributed across the four quarters than it has been historically if the rollout of a vaccine shifts more spending to services and offline shopping towards the back half of the year."
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7:17 a.m. ET: Futures trade sideways
Here’s where markets were trading Wednesday morning before the opening bell:
S&P 500 futures (ES=F): 3,927.25, down 0.5 points or 0.01%
Dow futures (YM=F): 31,465.00, up 7 points or 0.02%
Nasdaq futures (NQ=F): 13,749.50, down 18.25 points or 0.13%
7:13 a.m. ET Wednesday: Mortgage applications fell for back-to-back weeks as interest rates creep higher
Mortgage applications in the U.S. declined for a second consecutive week, according to the Mortgage Bankers Association's weekly index. Applications for mortgages were down 5.1% during the week ended February 12, following a drop of 4.1% the prior week.
The decline came as the subindex tracking refinances slid 5%, while the subindexes tracking purchase fell 6% during the week. However, refinances remained 51% higher than the same period last year. And on an unadjusted basis, purchase applications were still 15% higher than the comparable week in 2020.
“Expectations of faster economic growth and inflation continue to push Treasury yields and mortgage rates higher. Since hitting a survey low in December, the 30-year fixed rate has slowly risen, and last week climbed to its highest level since November 2020,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “The uptick in rates has slightly dampened refinance activity, with MBA’s index falling for the second week in a row, and the overall share dipping below 70% for the first time since last October.”
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6:10 p.m. ET Tuesday: Futures open mixed
Here’s where markets were trading Tuesday evening as the overnight session kicked off:
S&P 500 futures (ES=F): 3,925.25, down 2.5 points or 0.06%
Dow futures (YM=F): 31,449.00, down 9 points or 0.03%
Nasdaq futures (NQ=F): 13,742.00, down 25.75 points or 0.19%
New York Stock Exchange (NYSE) at Wall Street on January 12, 2021 in New York City. - US stocks on January 11, 2021 retreated from records set last week as political uncertainty, including efforts to remove President Donald Trump from power, has finally shaken investors. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images) ·ANGELA WEISS via Getty Images
