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Dow Slips, but Stimulus Progress Feeds Risk Appetite

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·2 min read
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By Yasin Ebrahim

Investing.com - The Dow struggled for direction on Wednesday as investors mulled the road ahead for the recovery, weighing up signs of waning consumer strength and the prospect of stimulus before year-end to support the economy.

The Dow Jones Industrial Average fell 0.15%, or 44 points. The S&P 500 was up 0.20%, while the Nasdaq Composite added 0.520%.

The Commerce Department said on Wednesday that retail sales fell 1.1% last month, a deeper contraction than the 0.3% decline expected. The retail sales control group – which has a larger impact on U.S. GDP – fell 0.5% confounding expectations for a 0.2% rise.

But with U.S. lawmakers nearing a deal on stimulus – expected to include much-needed support for businesses and unemployed Americans – economists expect the pain to be transitory.

"COVID and the UI cliff will continue to weigh on spending in December, but we believe Congress is very close to finalizing a new stimulus bill which will reinstate enhanced UI (unemployment insurance) benefits from January through April at $300/week (or $1200/month)," Jefferies (NYSE:JEF) said in a note.

Consumer discretionary stocks shrugged off signs of consumer weakness thanks to a rise in eBay (NASDAQ:EBAY), Hasbro (NASDAQ:HAS), and Chipotle.

Chipotle Mexican Grill (NYSE:CMG) rose 4% after Stifel upgraded its rating on the stock to buy from hold, and raised its price target to $1,500 from $1,400.

Technology stocks continued their strong start to the week, with Twitter Inc (NYSE:TWTR) among the notable gainers after an upgrade from JPMorgan (NYSE:JPM).

JPMorgan bumped Twitter to overweight from neutral with a $65 price target on expectations for online advertising growth to reaccelerate next year.

"We believe Twitter will show the biggest rebound given its sharper pandemic-driven ad decline, along with revenue prioritization throughout the company, early benefits from rebuilt ad tech through the new Ad Server and rollout of Map 2.0, and increases in both advertiser count and ad load," JPMorgan said.

Energy stocks cut losses as oil prices eased from lows on data showing a larger-than-expected U.S. weekly draw of 3.13 million barrels.

In other news, Aphria (TSX:APHA) is buying Tilray (NASDAQ:TLRY), which jumped 19%, to create a combined business valued at about $3.9 billion.

The mixed day on Wall Street comes as the Federal Reserve kept rates unchanged and pledged ongoing support for the economy. Fed Chairman Jerome Powell said the first-quarter data in 2021 will show a significant impact from a surge in the virus, but the economy should perform strongly in the second half of next year, underpinned by a boost from the vaccine rollout.

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