Stocks Wobble Between Small Gains and Losses

By Will Horner and Caitlin McCabe

U.S. stocks slipped Wednesday, pulling back from Tuesday's record highs as rising coronavirus cases and a murky outlook for a coronavirus stimulus weighed on investor sentiment.

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

The blue-chip index was recently off about 10 points, or 0.1%. The S&P 500 was teetering between small gains and losses, a day after the benchmark set its 27th closing record of the year. The Nasdaq Composite, meanwhile, dropped 0.2% after also setting a record 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 Tuesday, 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 large 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.

He added that he expects stocks to continue rallying in coming weeks, despite valuations that appear to be stretched.

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.

But investors remain skeptical about the prospects for fresh stimulus spending in the weeks before President-elect Joe Biden is sworn in.

Among the biggest winners in Tuesday's market were shares of energy companies, with Apache rising 8.6% and Occidental Petroleum jumping 7.7%. Pfizer rose 3.2% after its U.K. government approval.

Meanwhile, Salesforce.com tumbled 7%. The cloud-computing company on Tuesday confirmed that it had agreed to buy Slack Technologies for $27.7 billion.

And Tesla tumbled 3.1%. 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.

Later today, investors will be parsing the Federal Reserve's beige book report, due at 2 p.m. ET, which will provide the latest collection of business anecdotes across Fed districts. That will offer insights into how companies view the economy's prospects.

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.

Federal Reserve Chairman Jerome Powell and Mr. Mnuchin are set to testify before a house committee. 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 0.960%, from 0.933% on Tuesday.

Overseas, the Stoxx Europe 600 edged down 0.1%. 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 [e-mail] and Caitlin McCabe at [e-mail]

(END) Dow Jones Newswires

12-02-20 1205ET