The S&P 500 lost 0.1% on Wednesday as investors weighed a handful of headlines on the political, monetary, and geopolitical fronts, as well as the latest batch of earnings reports. The benchmark index was down as much as 0.7% in early trading action but climbed back to its flat line in the afternoon, where it faced some continued resistance near the 2800 level. 

The Dow Jones Industrial Average lost 0.3%. The Nasdaq Composite (+0.1%) and the Russell 2000 (+0.2%), however, finished higher. 

The S&P 500 health care (-0.5%), real estate (-0.4%), and communication services (-0.4%) sectors underperformed the broader market. Conversely, the energy (+0.4%), financials (+0.4%), and industrial (+0.4%) sectors outperformed.

Particular attention this morning was placed on congressional testimony from Fed Chair Jerome Powell, U.S. Trade Representative Robert Lighthizer, and President Trump's former personal lawyer, Michael Cohen.

Fed Chair Powell in his semi-annual monetary policy acknowledged the Fed is close to agreeing on a plan to end the balance sheet runoff. USTR Lighthizer said that it is too early to predict the outcome of the U.S.-China trade negotiations.  The views expressed by Mr. Cohen before the House Committee on Oversight and Reform ultimately had little, if any, impact on the market.

There were also some geopolitical events to consider. President Trump began a two-day meeting with North Korean leader Kim Jong Un in Vietnam, hoping to take steps toward denuclearizing North Korea. Separately, Pakistan shot down two Indian fighter jets over their contested border, escalating tensions between the two countries.

There was a lot of news for the market to digest Wednesday, including a Medicare-for-All proposal put forth by a Democratic congresswoman that weighed on the health care space.  In the end, neither buyers nor sellers showed much conviction in a market where it was easy to over-analyze things.

The outperformance from retail stocks supported an intraday rebound. Better-than-expected results from Lowe's (LOW 107.62, +2.59, +2.5%), TJX (TJX 51.56, +1.84, +3.7%), and Best Buy (BBY 68.82, +8.51, +14.1%) sparked a retail rally, evidenced by the SPDR S&P Retail ETF (XRT 46.08, +0.46) gaining 1.0%.

On the other hand, disappointing earnings and/or guidance from several companies, including Weight Watchers (WTW 19.37, -10.20, -35.5%) and Mylan N.V. (MYL 26.01, -4.61, -15.1%), helped keep a lid on the broader market. 

U.S. Treasuries were also under pressure, driving yields higher in a curve-steepening trade. The 2-yr yield increased three basis points to 2.51%, and the 10-yr yield increased six basis points to 2.69%. The U.S. Dollar Index increased 0.2% to 96.15. WTI crude rose 2.4% to $56.94/bbl following some bullish inventory data.

Reviewing Wednesday's economic data, which included Pending Home Sales for January, Factory Orders for December, the Advance Reports for International Trade in Goods, Retail Inventories, and Wholesale Inventories for December, and the weekly MBA Mortgage Applications Index:

• Pending Home Sales increased 4.6% in January (Briefing.com consensus -0.4%). Today's reading follows a revised reading of -2.3% in December (from -2.2%).
• Factory orders increased 0.1% in December (Briefing.com consensus +1.0%) following an upwardly revised 0.5% decline (from -0.6%) in November.
  • The key takeaway from the report was the understanding that business investment was weak, evidenced by the 1.0% decline in nondefense capital goods orders, excluding aircraft, that followed a 1.1% decline in November. That will compute as a negative input for Q4 GDP forecasts.
• Advance report for International Trade in Goods for December showed a deficit of $79.5 billion, the Advance report for Wholesale Inventories for December showed an increase of 1.1%, and the Advance report for Retail Inventories for December showed an increase of 0.9%.
• The weekly MBA Mortgage Applications Index increased 5.3% following a 3.6% increase in the prior week.

Looking ahead, investors will receive the Advance report for fourth quarter GDP, the weekly Initial and Continuing Claims report, and the Chicago PMI for February on Thursday. 

• Russell 2000 +17.2% YTD
• Nasdaq Composite +13.9% YTD
• Dow Jones Industrial Average +11.4% YTD
• S&P 500 +11.4% YTD