Stock Market Today: Stocks Slip on Mixed Economic Data Dump
While the major market indexes closed in the red, oil prices climbed to levels not seen since late 2018.
Investors have plenty to think about with the Federal Reserve's latest announcement on deck tomorrow, but on Tuesday they were first forced to consider a heaping helping of economic data – and found little to act on.
The biggest data point out today: U.S. producer price index (PPI) jumped 0.8% month-over-month in May to top economists' expectations.
"Following the May CPI report where core CPI also popped 0.7% [month-over-month], the PPI data add to the evidence of strong inflation pressures in the economy," say BofA Securities strategists.
Also Tuesday, May headline retail sales declined 1.3% month-over-month, falling below expectations for a more modest 0.7% decline.
"May's decline in headline sales was mostly concentrated in durable goods categories, which had shown especially outsized gains in March," say Barclays economists Jonathan Millar and Michael Gapen. "In particular, the May estimates show substantial spending moderation in motor vehicles and parts, furniture, and electronics – albeit with all these categories still running at very high levels."
And last month's industrial production improved 0.8% month-over-month but remained below pre-pandemic levels.
"As a whole, the numbers were slightly disappointing but are not changing the narrative," Michael Reinking, senior market strategist for the New York Stock Exchange, says about Tuesday's data dump. "Markets have been discounting recent economic data with the belief that some of the base effects, supply chain constraints and bottlenecks (expect to hear that word a lot tomorrow) will begin to unwind as we approach Q3."
A few pockets of the market showed strength Tuesday. Oil stocks such as Exxon Mobil (XOM, +3.6%) and Chevron (CVX, +2.2%) advanced after oil futures settled 1.8% higher to $72.12 per barrel, a two-year high. The industrials sector (+0.4%) and utilities (+0.3%) both finished modestly in the black, too.
But the major indices mostly retreated, with the Dow Jones Industrial Average off 0.3% to 34,299, the S&P 500 declining 0.2% to 4,246 and the Nasdaq Composite slipping 0.7% to 14,072.
Other action in the stock market today:
- The small-cap Russell 2000 declined 0.3% to 2,320.
- DraftKings (DKNG, -4.2%) took a hit today after Hindenburg Research said it has a short position on the sports gambling stock. Among several criticisms of DKNG, Hindenburg noted in a report that its research of SBTech – a European tech firm that merged with DraftKings as part of a broader special purpose acquisition company (SPAC) deal – shows "a long and ongoing record of operating in black markets."
- Sage Therapeutics (SAGE, -19.3%) was a notable decliner after the biotech reported Phase 3 data for the depression drug it's producing with Biogen (BIIB, -2.5%). While the treatment met its main goal in the late-stage study, there was still some uncertainty over the longer-term effectiveness of the drug.
- Gold futures notched a third straight loss, slipping 0.5% to finish at $1,856.40 an ounce.
- The CBOE Volatility Index (VIX) was up again Tuesday, climbing 3.8% to 17.02.
- Bitcoin prices briefly topped $41,200 today before settling for a 0.6% gain to $39,946.86. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Where You Can Still Find Value
After a sluggish start to 2021, growth has started pulling its weight in its tug-of-war with value, but the environment still seems to favor the latter.
"While the rate of growth will slow from the sharp rebound in 2021, the outlook for 2022 hardly portends the economic-growth scarcity that drove growth stocks to massively outperform at the end of the last cycle," says Carl Ludwigson, director of manager research for investment firm Bel Air Investment Advisors. "Furthermore, the expected tapering of asset purchases by the Fed should allow 10-year interest rates to drift higher even as the overnight rate remains pegged near zero, which favors value over growth stocks, as the latter depends more on future cash flows."
But now that value has been driven up for roughly half a year … what value is left?
You can always rely on value ETFs to do the choosing for you, as their methodologies can rotate out of some stocks as their prices go from low to lofty.
If you're picking on your own, we can at least point you in the right direction. These 15 Dividend Aristocrats, for instance, are looking much more fairly priced than their payout-growing brethren.
Of course, if you'd like to expand your search past the 65-member collection of Dividend Aristocrats, you can find a wider variety of stocks whose valuations haven't yet been elevated into the nosebleed seats. These 16 value stocks offer a little bit of everything: excellent fundamentals, income production and, of course, a decent price. Check them out.