Stocks opened flat on Wednesday as the market wrestled for direction for a second day amid rising interest rates, political uncertainty, and a still-raging pandemic.
The Dow Jones Industrial Average fell 31 points, or 0.1%. The S&P 500 was hovering just above the flatline and the Nasdaq Composite was up 0.2%.
Traders digested the latest inflation data release as the US consumer price index rose 0.4% in December. This was in line with an estimate by Dow Jones.
Stocks rose in the first week of 2021 but have stalled since then. The market closed on Tuesday little changed. In the meantime, the 10-year benchmark treasury's return briefly stood at 1.18%, its highest level since March. The reference interest rate has risen by more than 20 basis points since the beginning of the year.
Given the rise in interest rates, Credit Suisse advised investors to favor procyclical sectors such as finance and energy. However, rising rates could hurt growth stocks that have been the mainstay of the market during the pandemic.
The expectation of additional fiscal stimulus is one of the reasons for the steady rise in returns. President-elect Joe Biden is expected to release details of his economic plan on Thursday.
"At least a $ 500 billion tax package consisting of additional economic reviews, expanded unemployment benefits, and funding for health care and vaccine payments will continue to fuel economic growth in 2021," said Jason Draho, head of the Americas at UBS Global Wealth Management Asset Allocation.
After Tuesday's subdued session, major averages remain lower for the week. The Nasdaq Composite is the relative underperformance with a minus of around 1%. Small caps are a bright spot, however, and the Russell 2000 is up more than 1% so far this week.
The movements come as the turmoil in Washington continues. Vice President Mike Pence said Tuesday night he would not remove President Donald Trump from office. It did so before the Democratic House passed a resolution urging Pence and the cabinet to push Trump out of the White House after instigating the Capitol uprising last week.
The House of Representatives plans to vote on Wednesday to indict Trump for the second time.
Covid cases continue to increase in the US and abroad as well. The U.S. has at least 248,650 new Covid-19 cases and at least 3,223 virus-related deaths each day, based on a 7-day average calculated by CNBC using data from Johns Hopkins University.
Still, many say the US is ready to grow again later this year.
"In 2021, the US economy should experience a strong tailwind from additional fiscal and monetary stimulus, combined with an end to the impact of the pandemic on the economy," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. "The backlog in industries affected by COVID-19 … and a need to rebuild stocks should continue to fuel employment growth," he added.
Taken together, Schutte said this creates the conditions for above-average economic growth and he sees stocks rise to new highs.
– CNBC's Jacob Pramuk contributed to the coverage.
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