U.S. Stocks Close Little Changed Following Lackluster Session

After moving sharply higher over the course of the two previous sessions, stocks showed a lack of direction during trading on Wednesday. The major averages bounced back and forth across the unchanged line before ended the day little changed.

The major averages finished the session on opposite sides of the unchanged line. While the Nasdaq edged down 2.23 points or less than a tenth of a percent to 13,610.54, the Dow inched up 36.12 points or 0.1 percent to 30,723.60 and the S&P 500 crept up 3.86 points or 0.1 percent to 3,830.17.

A positive reaction to the latest earnings news contributed to initial strength on Wall Street, with Google parent Alphabet (GOOGL) helping to lead the way higher.

Shares of Alphabet surged up by 7.3 percent after the tech giant reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, online retail giant Amazon turned lower over the course of the session despite reporting better than expected fourth quarter results.

Amazon also announced CEO Jeff Bezos will transition to the role of Executive Chair in the third quarter of 2021, with Amazon Web Services chief Andy Jassy set to become CEO at that time.

A notable decline by shares of Amgen (AMGN) weighed on the Dow after the biotechnology company reported fourth quarter results that beat estimates but provided disappointing guidance.

The lackluster performance by the broader markets also came following the release of some upbeat economic data, which raised concerns lawmakers will feel less pressure to provide additional stimulus.

Before the start of trading, payroll processor ADP released a report showing a much stronger than expected rebound in private sector employment in the month of January.

ADP said private sector employment jumped by 174,000 jobs in January after decreasing by a revised 78,000 jobs in December.

Economists had expected employment to rise by 49,000 jobs compared to the loss of 123,000 jobs originally reported for the previous month.

“Based on these numbers, our estimate that the officials figures will show non-farm payroll employment unchanged last month, data due Friday, now looks a little pessimistic,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, “If non-farm payrolls did rally last month, that could complicate the push in Congress for another large-scale fiscal stimulus.”

A separate report released by the Institute for Supply Management showed U.S. service sector activity unexpectedly grew at an accelerated rate in the month of January.

The ISM said its services PMI inched up to 58.7 in January from a revised 57.7 in December, with a reading above 50 indicating growth in the service sector.

The uptick came as surprise to economists, who had expected the index to edge down to 56.8 from the 57.2 originally reported for the previous month.

With the unexpected monthly increase, the services PMI reached its highest level since hitting 58.8 in February of 2019.

Sector News

Despite the lackluster close by the broader markets, energy stocks moved sharply higher on the day as the price of crude oil climbed to its highest levels in over a year. Crude for March delivery jumped $0.93 to $55.69 a barrel.

Reflecting the strength in the sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index spiked by 4.8 percent and 4.3 percent, respectively.

Substantial strength was also visible among airline stocks, with the NYSE Arca Airline Index skyrocketing by 3.2 percent on the day.

Natural gas, banking and computer hardware stocks also saw notable strength on the day, while weakness among semiconductor stocks led to a 2.1 percent slump by the Philadelphia Semiconductor Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index advanced by 1 percent, while Australia’s S&P/ASX 200 Index climbed by 0.9 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index rose by 0.7 percent, the French CAC 40 Index ended the day nearly unchanged and the U.K.’s FTSE 100 Index edged down by 0.1 percent.

In the bond market, treasuries extended the downward trend seen over the past several sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.6 basis points to 1.131 percent.

Looking Ahead

Reports on weekly jobless claims, labor productivity and factory orders may attract attention on Thursday, although trading activity may be somewhat subdued ahead of the closely watched monthly jobs report on Friday.

On the earnings front, Allstate (ALL), eBay (EBAY), Grubhub (GRUB), PayPal (PYPL), MetLife (MET), and Qualcomm (QCOM) are among the companies releasing their quarterly results after the close of today’s trading.

Bristol-Myers (BMY), Clorox (CLX), Hershey Foods (HSY), Merck (MRK), Quest Diagnostics (DGX), and Yum! Brands (YUM) are also among the companies due to report their results before the start of trading on Thursday.