Wall Street flipped the week's script on Friday, with a cooling-off in interest rates stunting value-oriented stocks while providing much-needed relief for "growthier" names.
The Dow Jones Industrial Average lagged the broader indices with a 1.5% decline to 30,932, while the S&P 500 declined 0.5% to 3,811. The Nasdaq Composite, meanwhile, got a lift from the recently sold-off technology and communications sectors; stocks such as Facebook (FB, +1.2%), Nvidia (NVDA, +3.1%) and Microsoft (MSFT, +1.5%) helped lead a modest 0.6% rebound in the tech-heavy index.
Despite the rebound, the Nasdaq remained down 4.9% for the week, the result of interest-rate fears, versus 1.8% and 2.4% losses for the Dow and S&P 500, respectively.
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"Many market participants have referenced the infamous 'Taper Tantrum' in 2013 as a similar playbook to today as a reason why we're seeing equity market weakness," says Brian Price, head of investment management for Commonwealth Financial Network. But he also points out that "the notable difference today ... is that the Fed seems very committed to letting the economy run a little hotter than normal and will tolerate higher inflation."
Other action in the stock market today:
- The small-cap Russell 2000 eked out a marginal gain to 2,201.
- U.S. crude oil futures sank 3.2% to $61.50 per barrel, but still finished February up 18%.
- Gold futures sank, too, dropping 2.6% to $1,728.80 per ounce, plumbing nine-month lows.
- Bitcoin prices, at $48,870 on Thursday, dropped 5.1% to $46,381. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Earnings Estimates Are Looking Up!
Whatever the market faces in the short term, analysts see better times further on in the year.
Economic expectations are improving as more Americans are inoculated against COVID-19; nearly 14% of the population has received at least one dose, according to the Centers for Disease Control and Prevention.
That has analysts quickly scaling up their earnings estimates. Current-quarter profit expectations have improved by 5% over the first two months of Q1. According to FactSet Senior Earnings Analyst John Butters, that's "the second-highest increase in the bottom-up EPS estimate during the first two months of a quarter since FactSet began tracking this metric in Q2 2002," trailing only Q1 2018's 5.7% increase.
That augurs well for much of the market – including a number of dividend-rich sectors and industries. Many real estate investment trusts (REITs), especially in the retail and hospitality industries, are poised for better results as foot traffic picks up. And an economic recovery bodes well for business development companies (BDCs), as well as the small and midsized businesses in which they invest.
Investors will find plenty of attractive income opportunities across the equity board – though if you're looking for somewhere to start, we suggest you begin with our list of 21 high-quality (and high-yielding) stocks that are suitable for those looking to retirement (or even in it). These names offer an appealing blend of payout potential and income stability that just about any long-term buy-and-holder can appreciate.
Kyle Woodley was long NVDA and Bitcoin as of this writing.
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