The "great rotation" was in full swing yet again Wednesday, with a wide disparity between the market's value- and growth-oriented sectors.
Dragging on stocks broadly were reports that President Joe Biden and moderate Senate Democrats had reached a deal to reduce the number of Americans eligible for the next round of stimulus checks, with individuals being cut off at $80,000 in income instead of $100,000.
Projections by the Biden administration that the U.S. will have enough COVID vaccine doses to immunize all American adults by the end of May were blunted by measures in Texas and Mississippi to pull back from mask-wearing and social-distancing mandates, at odds with CDC recommendations.
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The Institute for Supply Management's February services index reading declined in February, to 55.3 – a slower rate of expansion affected by last month's winter storms, as well as higher input costs.
"February's 3.4pt decline in the services PMI came as a surprise to our at-consensus (58.7) forecast, which had anticipated that January's strong conditions would carry into February on the tailwind of December's renewed income relief and steady improvements on the pandemic front," says Jonathan Millar, deputy chief U.S. economist at Barclays Investment Bank. "In the event, the pattern of readings across categories seems broadly consistent with disturbances from the extreme cold snap."
Particularly plaguing growth stocks was a rebound in interest rates as inflation worries persist.
"Year-over-year comparisons in headline inflation data will show a sharp increase over the coming months, which may spook markets," says Rod von Lipsey, managing director, UBS Private Wealth Management, though he expects those numbers to be "short-lived."
Mega-cap tech and communications stocks such as Microsoft (MSFT, -2.7%) and Alphabet (GOOGL, -2.6%) dragged the Nasdaq Composite 2.7% lower to 12,997. But financial stocks such as American Express (AXP, +2.5%) and industrials including Boeing (BA, +2.4%) helped the Dow Jones Industrial Average escape with a modest 0.4% dip to 31,270.
Other action in the stock market today:
- The S&P 500 dropped 1.3% to 3,819.
- The small-cap Russell 2000 finished 1.1% lower, to 2,207.
- Gold futures declined 1.0% to $1,715.80 per ounce.
- U.S. crude oil futures rebounded 2.6% to hit $61.28 per barrel amid a jump in inventories, as well as uncertainty over whether OPEC+ nations would curb production cuts as planned in April, or extend them.
- Bitcoin prices jumped back up above the $50,000 level, improving by 6.5% to $50,980. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
What's Trending? Your Portfolio, Maybe.
Weeks ago, we talked about the Reddit/GameStop phenomenon, whereby investors took to social media in a successful attempt to "squeeze" heavily bet-against stocks higher.
That original wave has come and gone, but the spirit persists, in more ways than one.
For instance, Rocket Cos. (RKT, -32.7%) – the company behind Rocket Mortgage and other businesses – plunged today after a roughly one-week short squeeze that saw the stock more than double. But that quick ascent is evidence that plenty of retail (and smart-money) investors are still monitoring heavily shorted stocks for a quick trade.
And then there's the growing desire to track the sentiment behind how companies and stocks are being talked about on social media. Believe it or not, this isn't a new trend: Hedge fund managers and institutional investors have monitored the "wisdom of the crowd" for some time.
But this notion is about to solidify in a new VanEck exchange-traded fund launching tomorrow – one with a tie to controversial sports media tycoon (and more recently, day trader) David Portnoy, no less. We've taken a dive into this potentially polarizing fund ahead of its Thursday market debut, and one thing is for sure: This "buzzy" ETF is probably not what you think it is.
Kyle Woodley was long BA and Bitcoin as of this writing.
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