Wednesday's stock market action was. . . hesitant.
Most shares treaded water throughout the day amid a dearth of both earnings updates and splashy macroeconomic drivers – and perhaps some jitters ahead of Thursday's May consumer price index report, which will provide us the latest update on Wall Street's most prominent bugaboo: inflation.
"Our concern is that the current combination of monetary and fiscal policy could lead to an overshoot," says Eddy Vataru, chief investment officer of total return at asset manager Osterweis Capital Management.
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"Chair (Jerome) Powell has said the Fed will continue with its QE program until inflation is consistently above 2%, but from our perspective it seems probable it will creep higher than their target."
The Dow Jones Industrial Average declined 0.4% to 34,447 in a day that saw the major indexes end the session with modest losses, but the small-cap Russell 2000 (-0.7% to 2,327) also retreated after a run that had it on the verge of fresh highs.
More notable moves? Several big pharma stocks, including Bristol Myers Squibb (BMY, +2.7%) and Pfizer (PFE, +2.5%), enjoyed robust gains. Also, United Parcel Service (UPS, -4.2%) and FedEx (FDX, -3.2%) sank after the latter delivered profit-margin expectations for 2023 that were well below expectations.
Other action in the stock market today:
- The Nasdaq Composite eased back 0.1% to 13,911.
- The S&P 500 Index fell 0.2% to 4,219.
- Campbell Soup (CPB, -6.5%) was a notable decliner today after the packaged manufacturer reported earnings. In its fiscal third quarter, CPB reported adjusted earnings and revenue below consensus estimates, and lowered its full-year earnings-per-share guidance on a "rising inflationary environment" and temporary increases in supply chain costs
- U.S. crude oil futures slipped 0.1% to settle at $69.96 per barrel.
- Gold futures posted a fractional gain to end at $1,895.50 an ounce.
- The CBOE Volatility Index (VIX) jumped 4.8% to 17.89.
- Bitcoin bounced back following its recent retreat, with the digital currency adding 10.0% to $36,264.49. "Support seems clearly established at 30k for Bitcoin, but it may be tested a couple of more times," says Charlie Silver, CEO of Permission.io. "If it holds, I believe we will see new highs by the end of the year." (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Time to Tiptoe Back Into Risk?
While inflation is a cloud that could rain hard on the market's parade, broadly speaking, you could say the sky is starting to clear up.
Brad McMillan, chief investment officer for registered investment advisor Commonwealth Financial Network, says risks such as rising interest rates and the pandemic bear further monitoring, but "it appears that the worst impact from the pandemic on markets and the economy is likely behind us. Given the improvements for many of the factors that we track in this piece and the continued economic recovery during the month, we have upgraded the overall market risk level to a yellow light [from red]."
In other words, there isn't no risk – McMillan warns that more volatility could be in the cards -- but investors can at least feel a little more empowered to take on a bit more risk in the search for outperformance.
For some, that might mean simply delving into traditional growth stocks such as these top tech picks for the rest of 2021. Some prefer the short-term payoff of biotechs with big news on the horizon, while others might want to go diving into beaten-up solar firms and electric vehicle stocks that could have longer runways as green technology adoption grows.
Then there's a favorite of thrill seekers: low-priced stocks – typically those trading below $10. While this strategy is fraught with risk, you can do so with a little more security and strategy by paying attention to low-priced shares that still are on Wall Street's radar. Read on as we examine 10 such cheap stocks that the analyst community collectively appreciates.
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