By Yasin Ebrahim
Investing.com – The Dow eked out a record close Wednesday, as investors digested the latest wave of quarterly results from corporates and Federal Reserve Chairman Jerome Powell reiterated the need for accommodative monetary policy at a time when data shows runaway inflation worries are somewhat misplaced.
The Dow Jones Industrial Average rose 0.2%, or 61 points to a record high of 31,437.41. The S&P 500 was down 0.03%, while the Nasdaq Composite slipped 0.25%
Powell signaled it was important to keep the monetary stimulus spigot open as he continued to bat away growing concerns over an expected pick up in inflation, insisting rising prices in the immediate aftermath of the pandemic were unlikely to be sustained.
"Also important is a patiently accommodative monetary policy stance that embraces the lessons of the past—about the labor market in particular and the economy more generally," Powell said Wednesday to the Economic Club of New York on the "State of the U.S. Labor Market." "This means that we will not tighten monetary policy solely in response to a strong labor market," Powell said, recognizing the economy's ability to sustain a robust job market without causing an unwanted increase in inflation.
The remarks come as data showed core inflation in January was 0%, falling short of expectations for a 0.2% increase.
"Bottom line, inflation pressures remain very tame despite inventory shortages, shipping bottlenecks and surging commodity prices. Despite these cost pressures, retailers and/or producers are unable or unwilling to pass them through to consumers," Jefferies (NYSE:JEF) said in a note.
Energy stocks also pushed the broader market higher as oil prices rose on data showing an expectedly weekly drop in U.S. crude supplies that supports investor expectations the supply-demand tightening in oil will continue ahead of an anticipated jump in fuel demand as the economies reopen.
Crude inventories fell 6.64 million barrels last week, compared with analysts' expectations for a build of 985,000 barrels.
Consumer discretionary stocks, however, helped keep a lid on gains in the broader market with General Motors among the biggest decliners. GM's better-than-expected fourth-quarter results were offset by worries over rising costs amid an ongoing chip shortage.
General Motors (NYSE:GM) said the chip shortage that has plagued electric vehicle automakers across the industry would cost the company $1.5 billion to $2 billion this year, sending its shares 2% lower.
LYFT (NASDAQ:LYFT) reported fourth-quarter results that topped Wall Street's estimates and said it remained on track to become EBITDA profitable by the fourth quarter. It shares closed up more than 4%.
Twitter (NYSE:TWTR), meanwhile, helped pare losses in the wider tech sector after the social media giant rallied 13% on better-than-expected fourth-quarter results.
The beat on the bottom line for Twitter was driven by a "global rebound in advertising, primarily from brand advertisers, which make up most of the company’s revenue and expressed greater demand for displaying digital ads to Twitter’s larger audience as events and product launches returned," Wedbush said.
In other news, cannabis stocks including Canopy Growth (TSX:WEED), Aphria (TSX:APHA) and Tilray (NASDAQ:TLRY) on a Reddit-led wave of buying as retail traders bet on the Biden administration legalizing marijuana.
Yet analysts on Wall Street called for caution, particularly on Canopy Growth, which has more than doubled since the start of the year.
"We do not view the risk/reward as attractive on a fundamental basis for CGC shares at these levels to allocate new money. However, retail investor enthusiasm could remain a positive driver for shares near term," Oppenheimer said in a note.