Stocks Open Little Changed as Rally to Record Highs Takes a Pause

Stocks were mixed on Wednesday morning after the Dow Jones Industrial Average notched a record close the previous day as investors flocked to shares that stand to benefit from an economic recovery.

The blue-chip Dow rose 24 points, or 0.07%. The S&P 500 rose 0.06%. The Nasdaq Composite fell 0.4%.

Early losers included Dow component Salesforce, which fell more than 2% in premarket trading following a downgrade from UBS, which also cut Adobe, sending its shares down 1.8%.

Markets also faced pressure from stocks associated with the economic reopening: Wynn Resorts fell 2%, while Las Vegas Sands was off 1.5%. With Covid cases rising, pharma companies were under pressure, with Regeneron down 3% following a downgrade from Bank of America.

Bank of America gave an upgrade to Pfizer, however, noting that the company’s profits from Covid treatments provide upside for the stock. Pfizer’s shares moved 1.7% higher in premarket trading. Its partner, BioNTech, saw a 3% rise in shares in early trading.

ADP reported Wednesday that private job growth totaled 807,000 in December, more than double the Dow Jones estimate of 375,000. The data in the report covers only through the middle of December, however, which was before the height of the escalation in Covid cases and concerns.

Investors looking for clues on where the economy stands heading into the new year also awaited Friday’s more closely watched nonfarm payrolls count, which is expected to show a gain of 422,000.

They’re also awaiting the release Wednesday of minutes from the December Federal Reserve meeting. Policymakers decided then to accelerate the pace of the monthly bond buying taper and indicated that three quarter-percentage-point interest rate hikes are coming in 2022. They also adjusted their outlook on inflation and economic growth.

However, the market will be seeking additional information on where officials see policy heading, particularly on what will happen with the Fed’s nearly $9 trillion balance sheet.

The Dow is up 1.2% for the first week of the year, as of Tuesday’s close, and the S&P is slightly higher. The tech-heavy Nasdaq Composite took a turn with the move in bond yields and is down 1.3% for the week. The closely-watched benchmark 10-year Treasury yield jumped as high as 1.71% Tuesday, triggering a sell-off in growth-oriented technology stocks, which initially led market gains to start the week.

Megacap tech stocks underperformed the S&P 500 Tuesday as “investors reconsidered the value of such long-duration assets in the wake of higher rates,” Chris Hussey, a managing director at Goldman Sachs, said in a note.

“The Fed is accelerating its removal of liquidity because inflation has broadened, which has the potential to push 10-year yields higher,” Ed Al-Hussainy, senior rates strategist at Columbia Threadneedle, said in a note. “But the central bank must be careful not to act too aggressively, which could derail the economic recovery and cause a recession.”

Wall Street strategists are expecting a bumpier road ahead for the stock market as the Fed begins to tighten its ultra-easy monetary policy. The median year-end target for the S&P 500 now stands at 5,050, only a 5% gain from Tuesday’s close of 4,793.54, according to CNBC’s Strategist Survey.