A week of drowsy trading got no lift from the latest prospect of more government spending.
President-Elect Joe Biden on Thursday evening unveiled a $1.9 trillion "American Rescue Plan" that includes a number of provisions, including $1,400 stimulus checks, supplemental unemployment benefits and a $15-per-hour federal minimum wage.
And yet, stocks went red on Friday.
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Perhaps Wall Street had already baked in all of its expectations for the much-anticipated plan. Or perhaps the market remained distracted by COVID itself, which is still taking a hefty toll here in the U.S. as the vaccine rollout seems to crawl forward. Also of some concern was the start of the Q4 earnings season – mixed results from Citigroup (C, -6.9%) and Wells Fargo (WFC, -7.8%) weighed on those stocks and the rest of the financial sector.
The Dow Jones Industrial Average closed 0.6% lower to 30,814, and the rest of the major indices followed suit.
Other action in the stock market today:
- The S&P 500 took a 0.7% spill to 3,768.
- The Nasdaq Composite broke back below 13,000, dropping by 0.9% to 12,998.
- The Russell 2000 dropped hard off its all-time high, losing 1.5% to 2,123.
- Gold futures weren't exempt, dipping 1.3% to settle at $1,827.80 per ounce.
- U.S. crude oil futures finally cooled off, losing 2.4% to $52.31 per barrel.
- Bitcoin prices, at $39,633 on Thursday, plunged more than 10% to $35,579. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
- Tesla (TSLA, -2.2%) shares declined after receiving a Street-high $950 price target from Wedbush analyst Daniel Ives, but not a Buy recommendation.
Turbulence Ahead?
While optimistic about 2021 overall, many analysts predicted some bumpiness, especially in Q1, and we might be at the onset of one such rough patch.
"We have fairly high conviction in two things," says Canaccord Genuity equity strategist Tony Dwyer. "Conditions remain ripe for a temporary correction that should give back much of what has been gained since late last year, and when it comes, investors are likely to believe it is something more sinister than an overbought correction."
One thing that stood out clearly Friday was a flight to income-producing equities. Within the Dow itself, three of the five best performers were so-called "Dogs" – the industrial average's highest-yielding stocks as of the start of the year.
Business development companies (BDCs), a high-yielding but low-traffic area of the market, also outperformed.
And real estate, much maligned in 2020, earned some attention Friday. Real estate investment trusts (REITs) are well-known among income investors given their mandate to turn over at least 90% of their taxable profits via cash distributions to their shareholders. Many of them currently sport higher-than-normal yields after a difficult 2020, making them a one-two punch of income and rebound potential once the American economy settles back onto its track. Check them out.
Kyle Woodley was long Bitcoin as of this writing.
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