The week ended just as it started for investors, with the "reflation trade" lifting the likes of financial stocks and industrials while growthier sectors such as technology and communications lagged.
Inflation worries firmly gripped the wheel once again, with the 10-year Treasury yield crossing 1.6% again following the finalization of the Biden administration's $1.9 trillion stimulus package, which will see $1,400 stimulus payments sent out in days.
But the threat of economic overheating isn't just about stimulus checks, or even the reopening of the economy on its own – it's about a "massive surge in excess savings and liquid assets" being spent when the economy reopens, says Ethan Harris, head of global economics research at BofA Global Research.
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"We expect the glut of excess savings to help support exceptional growth this year in addition to the tailwinds from fiscal stimulus and an improving virus picture," he says.
Boeing (BA, +6.8%), which confirmed a deal to produce 24 737 Max aircraft (with an option for 60 more) for private investment firm 777 Partners, led the Dow Jones Industrial Average 0.9% higher to a record 32,778. The S&P 500 also eked out a modest 0.1% gain to a new high of 3,943. The tech-heavy Nasdaq Composite declined 0.6% to 13,319, weighed down by Alphabet (GOOGL, -2.4%) and Facebook (FB, -2.0%), among others.
Other action in the stock market today:
- The Russell 2000 gained 0.6% to 2,352.
- U.S. crude oil futures declined 0.6% to $65.61 per barrel.
- Gold futures finished with a small 0.2% loss to $1,719 per ounce.
- Bitcoin prices broke a winning streak with a 1.3% decline to $56,764. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
How to Invest in the Recovery
The Dow continues to flip the script from 2020, when it significantly lagged its major-index peers. The industrial average closed Friday up 7.1% for the year, versus 5.0% for the S&P 500 and 3.3% for the Nasdaq.
"Many of the Dow's top performers this year have been financial and industrial stocks – two 'reopening sectors' that could continue to benefit from the pandemic's end," says Lindsey Bell, chief investment strategist for Ally Invest. "When stocks break rank from the rest of the market, we pay attention.
"The Dow should be getting its day in the sun as the COVID market recovery reaches cyclical and value stocks. That's a good sign for where the economy and markets are heading."
But while you indeed can find many great plays for the current market environment within the Dow's 30 components, that's not the only place to dig them up.
We recently searched the much broader Russell 1000 in search of "recovery plays" – stocks that could enjoy a one-two punch of additional spending in the months to come, as well as additional interest from investors who have said they plan on putting some of their stimulus money back into the stock market.
We narrowed our list down to 11 such recovery stocks that still have ample upside and plenty of bullish pros willing to vouch for them.
Kyle Woodley was long BA as of this writing.
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