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An afternoon drop pushed major indices down on Wednesday, although the Dow Jones’ losses were minimal amid a rebound in energy and industrials stocks.
Oil prices have risen sharply thanks in part to a deadlock in the Suez Canal. (Really: A Panamanian container ship ran aground on Tuesday, obstructing the Egyptian passage through which 10% of the world’s maritime oil trade passes.)
While the impact on prices is expected to be short-lived, US crude oil futures jumped 5.9% to $ 61.18 per barrel, triggering strong gains in the Dow component. Chevron (CVX, + 2.7%) as well as other major energy values including ConocoPhillips (COP, + 2.9%) and EOG Resources (EOG, + 4.2%).
Also on Wednesday, IHS Markit’s “flash” reading of the service sector’s performance in February showed the strongest growth in more than six years, while manufacturing also picked up speed.
The Dow Jones Industrial Average, which had traded black for everything except the dying minutes of Wednesday’s session, edged down to 32,420. Chevron provided ballast, as did industrial companies caterpillar (CAT, + 1.4%) and Honeywell (HON, + 1.7%).
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Financials (XLF, + 0.4%) also showed slight relative strength. In her testimony to Congress on Wednesday, US Treasury Secretary Janet Yellen “made an interesting comment on share buybacks,” noted Anu Gaggar, senior global investment analyst for Commonwealth Financial Network. “She said financial institutions appear to be healthier and should have the ability to return capital to shareholders. Greater flexibility for redemptions and dividends could be an advantage for bank stocks.”
Other stock market action today:
- The S&P 500 fell 0.6% to 3,889.
- The Russel 2000 had another brutal session, ending 2.4% lower at 2,134. The small cap index fell nearly 9% last week.
- GameStop (GME, -33.8%) was in the spotlight after releasing its fourth quarter results on Tuesday night, and its stocks provided a fireworks display… just not the right type. “Sales fell 30.2% to $ 1.0 billion, missing consensus, with line-ups down 24.6%, also missing expectations,” said CFRA analyst Camilla Yanushevsky. “After jumping 135% since the start of the year, very little has changed in the fundamental history of GME. We are concerned about GME’s ability to maintain a competitive position, particularly given the heavy reliance on brick and mortar and the centuries-old shift from physical games to digital and mobile. “
- Gold Futures improved 0.5% to $ 1,733.20 per ounce.
- Bitcoin prices fell 4.4% to $ 54,770. (Bitcoin trades 24 hours a day; the prices listed here are at 4 p.m. each trading day.)
Nasdaq turbulence continues
Other parts of the market were going through much more choppy waters. The over-still, out-again Nasdaq Composite fell 2.0% to 12,961, hampered by You’re here (TSLA, -4.8%) and Facebook (FB, -2.9%).
We cannot fault the usual bugaboo, however; Treasury yields were on the decline Wednesday. But that’s not the only problem the index faces.
“The Nasdaq could fall 20% and trade again at 30 times (earnings), and the S&P could fall 20% and still have a P / E above 20. Both of these values are historically high,” said Sean O’Hara, President of ETF Pacer. “We get reports of strong earnings and GDP growth, but earnings and GDP are still lower than they were in 2020. So the broader market is expensive.”
Among other things, this means that it can be useful to identify growth trends and then wait for the right time to buy at lower prices, whether it is video game stocks, games. 5G or a host of other high-quality (but overheated) choices.
In the meantime, remember: Dividends are guaranteed to get you paid, even in sideways markets. While there are dozens of ways to peel that orange, one of the easiest is to fall back on one or two diversified income funds and keep fees low so you get more out of your return. Among your options you’ll find a quartet of highly regarded Vanguard dividend and income funds that we just reviewed – a mix of actively managed funds and index funds for equity and bond investors.
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