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Stocks end mixed after a day of wavering; bond yields fall

Ken Sweet, Damian J. Troise and Alex Veiga
Associated Press

Major U.S. stock indexes ended another up-and-down day of trading more or less where they started out, although a small gain nudged the Dow Jones Industrial Average to another record high.

The S&P 500 ended down less than 0.1%, while the Nasdaq gave back 0.3%.

Treasury yields fell after a government report showed that inflation remained tame last month. That’s encouraging for investors because it suggests the U.S. economy will be able to receive more stimulus without overheating. The yield on the 10-year Treasury note fell to 1.13% after being as high as 1.20% earlier this week.

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A street sign is displayed at the New York Stock Exchange in New York, Monday, Nov. 23, 2020.

Investors continued to monitor the latest company earnings reports, including better-than-expected results from Twitter and Under Armour. A report showing that inflation remained tame last month was encouraging for investors because it suggested the U.S. economy is in a strong position to receive more stimulus without overheating.

“Generally, the market has seen a very favorable backdrop and that likely remains the case going forward,” said Sal Bruno, chief investment officer at IndexIQ. “Inflation remains benign and there’s still going to be a pretty big stimulus package going forward.”

The Labor Department said Wednesday that U.S. consumer prices rose 0.3% in January, led by a surge in energy. Even though the gain was the biggest monthly increase since July, inflation over the past year has remained relatively low. Over the past year, inflation is up a modest 1.4%. Core inflation, which excludes volatile food and energy costs, is also up 1.4% with core prices unchanged in January.

Investors have started watching inflation metrics more closely as Democrats in Congress prepare to inject $1.9 trillion of stimulus into the economy. U.S. businesses are starting to reopen and millions of Americans are now vaccinated, meaning there could be a surge of economic activity and therefore potential inflation. Before Wednesday’s report, Treasury yields had been climbing steadily for weeks, which is typically a sign that investors expect both the economy to get better and for inflation to increase.

“Consumer price inflation remains very tame,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.

Twitter and Under Armour jumped 8.9% and 8% respectively after delivering quarterly report cards that were much better than analysts were expecting. Twitter became the latest tech giant to report strong results despite the pandemic.

Energy companies were holding up well and making some of the broadest gains as oil prices edged higher, adding to a roughly 12% gain so far in February. Devon Energy rose 4.2% and Hess gained 2.7%.

Cannabis stocks surged as members of the same online forum that hyped up GameStop, AMC Entertainment and other beaten-down companies in recent weeks began encouraging each other to snap up shares in marijuana companies.

Canadian cannabis company Sundial Growers vaulted 74%. The stock is up more than 500% so far this year. Shares in Aphria and Tilray, Canadian marijuana companies that agreed to combine in December, also rose. Aphria was up about 11%, adding to its 281% gain this year, while Tilray jumped about 37%. It’s up more than 600% this year.

Marijuana stocks had been surging before becoming the latest darling of online investors as more states moved last year to allow legal sales. The stocks are also benefiting from optimism that industry friendly legislation measures supported by Democrats, but blocked by Republicans, could become law under the Biden administration. Last week, Democratic leaders in the Senate reiterated their intention to move on comprehensive cannabis reform in the current legislative session.

“At least in this case there’s either momentum or fundamentals underpinning a move like this,” said Sam Stovall, chief investment strategist at CFRA. “At the same time, you wonder if it’s simply another form of speculation.”

Shares in GameStop and AMC Entertainment, which have been recently pulling back sharply from their runup at the end of January, were up 6.5% and 9%, respectively.

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AP Economics Writer Martin Crutsinger contributed to this report from Washington.