U.S. Stocks Showing A Lack Of Direction After Seeing Initial Strength

After moving to the upside at the start of trading on Wednesday, stocks have shown a lack of direction over the course of the morning. The major averages have pulled back off their highs of the session and have recently been bouncing back and forth across the unchanged line.

Currently, the major averages are turning in a mixed performance. While the Nasdaq is up 8.83 points or 0.1 percent at 13,621.61, the Dow is down 96.10 points or 0.3 percent at 30,591.38 and the S&P 500 is down 0.78 points or less than a tenth of a percent at 3,825.53.

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

Shares of Alphabet currently remain up by nearly 7 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 has turned lower over the course of the morning 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) is weighing 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 comes following the release of some upbeat economic data, which has 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.

Despite the lackluster performance by the broader markets, energy stocks are seeing significant strength as the price of crude oil has reached a new one-year high. Crude for March delivery is currently jumping $1.25 to $56.01 a barrel.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index is up by 3 percent and the Philadelphia Oil Service Index is up by 2 percent.

Considerable strength is also visible among airline stocks, as reflected by the 2.6 percent jump by the NYSE Arca Airline Index.

On the other hand, semiconductor stocks have shown a notable move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 1.3 percent.

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 have turned mixed on the day. While the German DAX Index is up by 0.6 percent, the French CAC 40 Index is down by 0.1 percent and the U.K.’s FTSE 100 Index is down by 0.3 percent.

In the bond market, treasuries are extending 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, is up by 2.4 basis points at 1.129 percent.