Dow, S&P Close Higher, While Nasdaq Slips--Update

By Will Horner and Sam Goldfarb

The S&P 500 climbed for the third straight session Wednesday as investors continued to turn their attention back to an improving economic outlook and past the recent drama involving GameStop and a handful of other stocks.

Stock markets have rallied this week, shaking off concerns about stretched valuations, the threat of new coronavirus variants and a sharp run-up in silver and a group of stocks popular with day traders. Investors have focused instead on better-than-expected corporate results, progress in coronavirus vaccinations and bets that President Biden will deliver more fiscal spending in coming weeks.

"The last two days have seen the return of the feeling that we still have monetary stimulus in the background and the prospect of an additional stimulus package to come," said Seema Shah, chief strategist at Principal Global Advisors. "The path ahead isn't a smooth one, but we think it is an upward one."

The broad stock index climbed 3.86 points, or 0.1%, to 3830.17. The Dow Jones Industrial Average rose 36.12 points, or 0.1%, to 30723.60, while the tech-heavy Nasdaq Composite Index fell 2.23 points, or less than 0.1%, to 13610.54.

Giving investors further cause for optimism was fresh economic data that showed continued improvement in the U.S. services sector.

The Institute for Supply Management's services index for January climbed to 58.7 from a revised 57.7 the previous month. Economists surveyed by The Wall Street Journal had anticipated a reading of 57.0.

Moving in tandem with stocks, the yield on the benchmark 10-year U.S. Treasury note rose to 1.129% from 1.105% Tuesday. Yields, which rise when bond prices fall, tend to climb when investors expect faster growth and inflation, along with more government borrowing.

Investors, meanwhile, reacted to a mixed batch of corporate earnings.

Shares in Alphabet climbed $139.76, or 7.3%, to $2,058.88 after the parent of Google said late Tuesday that it had booked record revenue in the fourth quarter.

Spotify Technology, though, slipped $27.80, or 8.1%, to $317.25 after it offered a cautious view of the year ahead early Wednesday, and Biogen fell $14.47, or 5.2%, to $263.25 after it also offered downbeat guidance.

Amazon.com shares dropped $67.47, or 2%, to $3,312.53 on Wednesday. The giant online retailer late Tuesday posted record quarterly sales, marking the first time its revenue crossed more than $100 billion in a three-month period. It also said Jeff Bezos would be stepping down as CEO.

"Earnings have been definitely quite a bit stronger than anyone expected, and they are led by the areas that we have so far seen strength in: the tech sector, the stay-at-home sector," said Matt Forester, chief investment officer of BNY Mellon's Lockwood Advisors. "We still have a lot to see, though, particularly in the sectors that have been so heavily impacted by Covid."

Investors are closely following talks between lawmakers over another round of coronavirus relief measures. President Biden's administration has called for a package totaling $1.9 trillion, though a counter offer from Republicans this week was less than half of that. The Democrats are expected to make a decision in coming days on whether to start trying to quickly push into law a larger stimulus bill on their own.

"The bigger focus is on the timing," said Mrs. Shah. "There is a general view that the stimulus will be sizable, the important question is, does it come soon enough because the U.S. economy needs it now."

Some stocks that have soared in popularity among traders on online forums edged higher Wednesday, after suffering sharp reversals in the previous session. AMC Entertainment Holdings rose $1.15, or 15%, to $8.97, having fallen 41% on Tuesday. GameStop ticked up $2.41, or 2.7%, to $92.41 after slumping 60% Tuesday.

Treasury Secretary Janet Yellen has called a meeting with top financial regulators to discuss recent volatility in financial markets related to GameStop, a Treasury spokeswoman confirmed Tuesday night.

Last week, major stock indexes fell at the same time as stocks at the center of the social media frenzy surged, suggesting that headlines about the phenomenon were making some investors nervous.

"Any time we see extensive volatility in markets that brings a level of uncertainty for investors across the board," said Charlie Ripley, senior investment strategist for Allianz Investment Management.

Volatility, though, "has come down quite a bit from where it was last week," he said.

In commodity markets, Brent crude, the international benchmark for oil, rose 1.7% to $58.46 a barrel. The gauge is near its highest level since the pandemic rattled global financial markets last spring.

Silver prices gained 1.9% to $26.88 a troy ounce

Overseas, the pan-continental Stoxx Europe 600 advanced 0.3%. Italy's FTSE MIB stocks index outperformed other regional benchmarks after former European Central Bank President Mario Draghi was asked to form a new government.

In Asia, Japan's Nikkei 225 rose 1%. Hong Kong's Hang Seng added 0.2% while on the Chinese mainland, the Shanghai Composite Index fell 0.5%.

Write to Will Horner at [e-mail] and Sam Goldfarb at [e-mail]

Corrections & Amplifications

This article was corrected at 5:39 p.m. ET to reflect that Amazon.com shares dropped $67.47, or 2%, to $3,312.53 on Wednesday. The original version of this article incorrectly said the shares fell $10.50, or 0.4%, to $2,802.50.

This article was corrected on Feb. 4, 2021 because the original version omitted the direction of the silver price move. Silver prices gained 1.9% to $26.88 a troy ounce Wednesday.

(END) Dow Jones Newswires

02-03-21 1656ET