Stock Market Today: Dow Edges Higher Despite Growing Rift With China

The broader markets scored marginal gains Wednesday as several potential headwinds swirled but failed to fully crack investor optimism.

U.S.-China tensions are ratcheting up again, for one. China's Foreign Ministry decried an "unprecedented escalation" Wednesday, claiming the U.S. ordered it to shut its Houston consulate – a day after the Department of Justice charged two Chinese hackers with probing American companies for coronavirus research and stealing trade secrets.

Also, Congress continues to stumble toward a new stimulus deal, and the $600-per-week extra unemployment benefit is just days away from expiring. (Several afternoon reports say Republicans are considering extending the jobless bonus, but at a much-reduced rate of $100 per week.)

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The Dow Jones Industrial Average finished up just 0.6% to 27,005, the S&P 500 closed 0.6% higher to 3,276, the Nasdaq Composite eked out a 0.2% gain to 10,706, and the small-cap Russell 2000 improved by 0.2% to 1,490.

But a few individual stocks generated a little more movement:

• Industrial average component Pfizer (PFE, +5.1%) jumped after landing a nearly $2 billion order from the U.S. government for 100 million doses of its experimental COVID-19 vaccine.
• Social media platform Snap (SNAP, -6.2%) dipped after reporting disappointing user growth and swelling losses.
• Slack Technologies (WORK, -5.1%) fell after it accused Microsoft (MSFT, +1.4%) of anticompetitive behavior in Europe.
• And Tesla (TSLA) was surging more than 6% in early after-hours trading after reporting an adjusted $2.18-per-share profit that hammered expectations of 3 cents per share. The electric vehicle (EV) stock also said it earned $104 million on a GAAP (generally accepted accounting principles) basis, marking its fourth consecutive net profit.

Don't Completely Ignore Defense

As volatility continues and potential hurdles mount, some investors might want to fortify their defenses. That seemed to be the case Wednesday, as utility stocks (+1.5%) were among the few sectors demonstrating any real direction.

And don't forget about bonds, either, which have run up considerably in 2020 – in part thanks to the Federal Reserve.

"The Fed announced its Secondary Market Corporate Credit Facility (SMCCF) on March 23, and the SMCCF has capacity to purchase up to $250 billion in mainly IG corporate bond assets, via buying of individual securities and exchange-traded funds (ETFs)," writes Peter Wilson, Global Fixed Income Strategist at Wells Fargo Investment Institute. "As of June 30, the facility had purchased $9.6 billion, almost $8 billion in ETFs and $1.6 billion in individual bonds.

"To put this into perspective, the total assets of the largest U.S. IG corporate ETF have doubled since March 19 this year, reaching $56.5 billion as of July 14, so it is clear to us that private-sector purchases have swamped the Fed’s own buying."

For those who don't wander into the fixed-income markets much, we suggest brushing up on bond basics first.

Once you're a little more acclimated, you have a wealth of options to choose from. For instance, municipal bond funds allow you to generate yields that are heavily shielded from the tax man.

But there are plenty of other bond strategies – from short-term Treasuries to corporate bonds and more. If you want to seek out protection in the debt markets, read on as we introduce you to a dozen ETFs and mutual funds that put literally thousands of bonds to work for you.