US stocks took a breather on Wednesday, with investors turning their focus to corporate earnings reports to justify valuations following a three-day record-setting rally. A strong US jobs report on Friday, easing political tension in Japan and Britain and increased prospects of central banks providing stimulus post Britain's vote to leave the European Union, calmed nerves and boosted faith in equities.
The S&P hit a record high for the third consecutive day on Wednesday. However, the three major US indexes struggled to sustain momentum as investors looked for new catalysts. "Markets are digesting their recent gains and are somewhat directionless. I think that it will be hard for us to go up much from here unless there are some positive surprises," said Daniel Kern, chief investment strategist at TFC Financial Management in Boston.
The S&P 500 is currently trading at 17.3 times forward earnings, compared with its 10-year average of 14.7, according to StarMine data. While second-quarter earnings of S&P 500 companies are expected to fall 5 percent, along the same lines as the first, growth is expected to occur throughout the second half of 2016. At 12:31 pm ET (1631 GMT), the Dow Jones Industrial Average was down 14.45 points, or 0.08 percent, at 18,333.22, easing slightly after hitting a record 18,390.16.
The S&P 500 was down 3.57 points, or 0.17 percent, at 2,148.57. It hit a record of 2,156.45. The Nasdaq Composite was down 12.37 points, or 0.25 percent, at 5,010.45, barely hanging onto its gains for the year. The index on Tuesday turned positive for the first time in 2016.