Stocks started Friday with gains but lost steam as the day wore on, even as the latest consumer sentiment data came in better than expected.
After yesterday's consumer price index release, which showed inflation is indeed on the rise, today's economic numbers revealed that consumers have "unfavorable perceptions" of market prices for homes and automobiles.
Complicating matters for market participants, these two latest examples of anxiety over rising prices come ahead of next week's Federal Open Market Committee meeting, which investors will be closely watching for any signs of "taper talk" and other interest-rate policy hints.
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That said, the latest inflation data "likely does little to change the Fed's timetable for tapering asset purchases," says Ryan Detrick, chief market strategist at LPL Financial.
"The coming months will be telling, though, as we are now entering the 'show me' phase of the inflation debate where market participants will be increasingly anxious for the Fed to prove its assertion that higher inflation will be transitory."
At the close, though, the Nasdaq Composite was up 0.4% at 14,069, the S&P 500 Index gained 0.2% to 4,247 – enough for a new record high – and the Dow Jones Industrial Average ended marginally higher at 34,479.
Other action in the stock market today:
- The small-cap Russell 2000 gained 1.1% to 2,335.
- Chewy (CHWY, -5.8%) fell after its latest quarterly update. While the online pet supplies retailer reported a surprise per-share profit in its first quarter, it warned of labor shortages and "supply-chain challenges."
- Vertex Pharmaceuticals (VRTX, -11.0%) was another notable decliner today. The biotech said it would halt development of its alpha-1 antitrypsin deficiency (AATD) drug after VRTX said it likely wouldn't have real clinical benefits for those suffering from the rare genetic disease.
- U.S. crude oil futures rose 0.9% to end at $70.91 per barrel.
- Gold futures slipped 0.9% to settle at $1,879.60 an ounce.
- The CBOE Volatility Index (VIX) retreated 2.8% to 15.65.
- Bitcoin rose 1.6% to $37,282.31. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Is Growth the New "Pain Trade"?
That's a question Michael Reinking, senior market strategist for the New York Stock Exchange, is pondering.
"There is an old adage that markets move in ways that inflict the maximum amount of pain to the most participants. We see this time and again and it has occurred multiple times within the most recent market rebound," he says.
"Over the last few months the overly simplified group think has evolved to: given the re-opening and the economic rebound, interest rates will move higher and cyclicals/value stocks will outperform. Short positions in the Treasury markets hit record highs in May at the same time hedge fund positioning in growth-oriented sectors were hitting lows. So what is the pain trade? Yields move lower, cyclicals underperform and growth re-emerges."
Some investors, however, are chasing "growth" of a different sort -- quick pops in stocks that a large number of other investors have bet against, such as these 25 stocks with high short interest.
But for most buy-and-holders, it makes sense to seek out longer-term growth trends. You can find them in individual picks such as machine-learning stocks, cybersecurity names, and these 5G plays, or you can spread your risk across this batch of 13 growth ETFs. These funds allow any investor to harness the power of numerous high-growth trends without having to live or die by any one or two companies' ups and downs.
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