Stocks close near lows as the U.S. blacklists more Chinese firms
••• The S&P 500 (+0.7%), Dow Jones Industrial Average (+0.9%), and Nasdaq Composite (+0.9%) extended their winning ways on Wednesday and closed at new record highs. The Russell 2000 kept pace with a 0.7% gain. The narratives driving stocks higher remained unchanged. Reports continued to indicate the slowing pace of the coronavirus, Fed Chair Powell`s congressional testimony assured investors that monetary policy will remain favorable, and the positive bias in stocks (including foreign ones) continued to fuel risk sentiment. Ten of the 11 S&P 500 sectors contributed to the advance with the energy (+1.4%) and information technology (+1.1%) sectors taking the top spots today. Energy stocks received extra support from a 2.3% gain in WTI crude ($51.17/bbl, +1.16). The consumer staples sector (-0.04%) sat this one out with a marginal loss. Apple (AAPL 327.20, +7.59, +2.4%) remained an influential force in the market, while smaller companies Micron (MU 59.27, +2.02, +3.5%), Las Vegas Sands (LVS 71.13, +2.28, +3.3%), and Wynn Resorts (WYNN 136.82, +4.83, +3.7%) benefited from analyst upgrades. Bank of America/Merrill Lynch liked the risk-reward ratios for LVS and WYNN given the improving coronavirus situation. On the downside, shares of Lyft (LYFT 48.46, -5.48, -10.2%), Western Union (WU 26.13, -2.11, -7.5%), and Bed Bath & Beyond (BBBY 11.79, -3.06, -20.6%) were among today`s biggest laggards in response to earnings results. Treasuries remained out of favor amid the bullish bias in stocks. The 2-yr yield increased two basis points to 1.44%, and the 10-yr yield increased four basis points to 1.63%. The U.S. Dollar Index remained strong, closing 0.3% higher at 99.00. Separately, the CBOE Volatility Index fell 9.5% to 13.74, returning to levels seen before the coronavirus started to hit stocks last month.
••• Reviewing economic data:
Reviewing Wednesday`s economic data:
• The Treasury Budget for January showed a deficit of $32.6 billion versus a surplus of $8.7 billion in the same period a year ago. This budget data is not seasonally adjusted, so the January deficit cannot be compared to the deficit of $13.3 billion for December.
• The budget deficit over the last 12 months is $1.063 trillion versus $1.022 trillion in December. The fiscal year-to-date deficit is $389.2 billion versus $310.3 for the same period a year ago.
• The weekly MBA Mortgage Applications Index increased 1.1% following a 5.0% increase in the prior week.
••• Looking Ahead:
• Looking ahead, investors will receive the Consumer Price Index for January and the weekly Initial and Continuing Claims report on Thursday.
••• Top Market drivers:
• The stock market extends rally to new highs in a mostly broad-based advance
• Positive views regarding the coronavirus, the economy, and monetary policy
• Defensive-oriented stocks underperformed
••• Stock Market Sectors:
• Strong: Energy, Information Technology
• Weak: Consumer Staples