Wall Street rally runs out of steam ahead of Powell talk

By Devik Jain and Medha Singh (Reuters) - The S&P 500 and the Nasdaq slipped from record levels in volatile trading on Wednesday as Reddit forum turned their focus to cannabis stocks while investors looked to a speech by Federal Reserve Chair Jerome Powell in the afternoon.

Reuters February 11, 2021 00:06:39 IST
Wall Street rally runs out of steam ahead of Powell talk

Wall Street rally runs out of steam ahead of Powell talk

By Devik Jain and Medha Singh

(Reuters) - The S&P 500 and the Nasdaq slipped from record levels in volatile trading on Wednesday as Reddit forum turned their focus to cannabis stocks while investors looked to a speech by Federal Reserve Chair Jerome Powell in the afternoon.

Tesla Inc's 4.2% slide and Amazon.com Inc's 1.1% drop weighed the most on the S&P 500 and the Nasdaq. Shares of both the companies pulled the consumer discretionary index down 1.3%.

Shares in cannabis companies surged, extending a months-long rally due to bets on decriminalization under the administration of President Joe Biden, as the Reddit community behind a recent trading frenzy talked up the stocks.

Wall Street's fear gauge spiked to a one-week high of 23.85 points.

"When you get a highly speculative market things can turn, really off notice," said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

"Its a small correction in the sense that the dominating feature to these markets remain low interest rates, the passage to Biden's package - whether it's as big as they hoped or whether it's a slightly scaled down version."

Bets on more fiscal aid and swift vaccine distribution have powered the main U.S. stock indexes to a series of all-time peaks recently.

Biden on Tuesday agreed to a proposal by Democratic lawmakers to limit or phase out stimulus payments to higher-income individuals as part of his administration's $1.9 trillion coronavirus relief bill.

The Russell 1000 value index, which is heavily weighted towards cyclical sectors, rose 0.1%, while the growth index, which comprises large tech companies, was down 0.3%.

"Valuations are stretched, we're overbought but there's a lot of sectors that haven't participate as well ... and rotation into these pockets always seems to keep this market floating," said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas.

Twitter Inc added about 7.6% after it forecast a strong start to 2021 as ad spending rebounds from a rock bottom.

The social media platform has thought about whether to hold bitcoin on its balance sheet, but it has not made any changes yet, Chief Financial Officer Ned Segal told CNBC.

At 11:58 a.m. ET, the Dow Jones Industrial Average rose 26.79 points, or 0.09%, to 31,403.30, the S&P 500 lost 3.50 points, or 0.09%, to 3,907.61 and the Nasdaq Composite lost 37.00 points, or 0.26%, to 13,971.16.

Data on Wednesday showed U.S. consumer prices rose moderately in January but underlying inflation remained benign amid a pandemic that has fractured the labor market and services industry.

The Fed has signaled it would tolerate higher prices "for some time" as the economy climbs out of a coronavirus-driven recession. Powell will be speaking about the state of the U.S. labor market in a webinar at 2 p.m. ET (1900 GMT).

Fourth-quarter earnings have so far also exceeded expectations, supporting sentiment.

Lyft Inc jumped 5.6% after the ride-hailing firm said it is chopping costs and now expects to be profitable in the third quarter.

Advancing issues outnumbered decliners by a 1.1-to-1 ratio on the NYSE and on the Nasdaq.

The S&P 500 posted 44 new 52-week highs and no new low, while the Nasdaq recorded 576 new highs and 29 new lows.

(Reporting by Devik Jain and Medha Singh in Bengaluru; editing by Uttaresh.V and Maju Samuel)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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