U.S. Stocks Move Modestly Higher In Morning Trading

Stocks have moved slightly higher in morning trading on Wednesday, offsetting the modest weakness seen in the previous session. The major averages have all moved to the upside, although buying interest has remained relatively subdued.

Currently, the major averages are holding on to modest gains. The Dow is up 51.15 points or 0.2 percent at 33,481.39, the Nasdaq is up 24.69 points or 0.2 percent at 13,623.07 and the S&P 500 is up 8.07 points or 0.2 percent at 4,082.01.

The modest strength on Wall Street may partly reflect optimism stocks will continue to reach new record highs as the economy recovers from the coronavirus pandemic.

Optimism about a swift economic rebound has helped prop up the markets throughout much of the past year, although some analysts have expressed concerns about stocks becoming overbought.

In his annual letter to shareholders, JPMorgan Chase chairman and CEO Jamie Dimon acknowledged valuations are “quite high” but noted a multi-year booming economy could justify current prices.

“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon wrote. “This boom could easily run into 2023 because all the spending could extend well into 2023.

He added, “Equity markets look ahead, and they may very well be pricing in not only a booming economy but also the technical factor that lots of the excess liquidity will find its way into stocks.”

Trading activity has remained somewhat subdued, however, as traders look ahead to the release of the minutes of the Federal Reserve’s latest monetary policy meeting, which could shed additional light on the outlook for interest rates.

Estimates provided after the meeting show Fed officials expect rates to remain at near-zero levels through 2023, but the fed funds futures market is predicting a rate hike in December 2022 following recent upbeat economic data.

On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit widened more than expected in the month of February.

The Commerce Department said the trade deficit widened to $71.1 billion in February from a revised $67.8 billion in January.

Economists had expected the deficit to widen to $70.5 billion from the $68.2 billion originally reported for the previous month.

With the bigger than expected increase in February, the size of the U.S. trade deficit reached a new record high.

The wider deficit came as the value of exports tumbled by 2.6 percent to $187.3 billion, while the value of imports slid by 0.7 percent to $258.3 billion.

Despite the uptick by the broader markets, biotechnology stocks have shown a notable move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 1.5 percent.

Housing and gold stocks are also seeing some weakness in morning trading, while steel stocks have shown a strong move to the upside.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index edged down by 0.1 percent.

The major European markets have also turned mixed on the day. While the German DAX Index is down by 0.1 percent, the French CAC 40 Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 1 percent.

In the bond market, treasuries are showing a lack of direction after moving notably higher on Tuesday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.649 percent.