The stock-market rebound from Monday's steep selloff continued Wednesday, with traders taking their cues from the earnings calendar and stability in the bond market.
An exodus to the safety of bonds continued to ease, with the 10-year Treasury yield recovering another 8 basis points to 1.293% after hitting a five-month low on Monday. (A basis point is one one-hundredth of a percentage point.)
Coca-Cola (KO, +1.3%) provided some enthusiasm after posting second-quarter revenues that surpassed 2019 levels and lifting its full-year earnings outlook. Chipotle (CMG, +11.5%) also surged after announcing a wide Q2 earnings beat, fueled by a 38.7% year-over-year surge in revenues.
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Meanwhile, U.S. crude oil futures jumped 4.6% to $70.30 per barrel even as inventories increased by 2.1 million barrels – a surprise to analysts who expected a drop of 4.5 million barrels. Exxon Mobil (XOM, +3.2%) and Chevron (CVX, +3.4%) were among the energy sector's biggest beneficiaries of the oil-price move.
Today's finish looked much like yesterday's; the Dow Jones Industrial Average (+0.8% to 34,798), S&P 500 (+0.8% to 4,358) and Nasdaq (+0.9% to 14,631 put up similar advances, while the small-cap Russell 2000 (+1.8% to 2,234) outpaced its larger-cap brethren.
Other action in the stock market today:
- Netflix (NFLX) was in the spotlight today after Tuesday night's earnings report. IThe streaming service reported lower-than-expected second-quarter earnings of $2.97 per share, though revenue of $7.34 billion arrived just above the consensus estimate. Subscriber adds were the main talking point today, though. Netflix reported 1.54 million new paid subscribers over the three-month period; while this was more than analysts projected, it was the lowest quarterly amount on record. Plus, the company forecast a slimmer-than-anticipated 3.5 million net additions in the current quarter. NFLX stock closed the day down 3.3%.
- United Airlines Holdings (UAL) was another earnings mover. The airline posted an adjusted per-share loss of $3.91 in its second quarter – in line with expectations – while revenue of $5.47 billion came in above the consensus forecast. UAL rose 3.8% today.
- Gold futures slipped 0.4% to end at $1,803.40 an ounce.
- The CBOE Volatility Index (VIX) dipped 9.2% to 17.91.
- Bitcoin, which breached the $30,000 level yesterday, recovered with a 6.3% rally to $31,683.24. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
The Elusive Stock Market Correction
Stocks, for the moment, have managed to yet again dodge something that regularly occurs multiple times each year: a 5% drawdown.
"The truth is investors have been very spoiled by the recent stock market performance," says Ryan Detrick, chief market strategist for LPL Financial. "The average year sees three separate 5% or more pullbacks for the S&P 500 with not a single one happening yet in 2021."
That fact alone doesn't necessarily mean a 5% drop is right around the corner, he says, but several market factors make it more likely, including fewer stocks participating in the market's up days, weak seasonality, a lack of bears and the choppiness that is typical of a second-year bull market.
We've spent the past couple of days discussing defensive options for those who want to shield their portfolios from volatility, but we should remind investors that pullbacks are also an opportunity to buy good stocks at even better prices.
Fund investors looking for stocks powered by strong secular trends will want to explore these seven ETFs, which provide access to broad-based growth drivers, as well as specific themes.
If you prefer to invest in trends more granularly, though, there's no shortage of options.
Auto parts suppliers, for example, are in the spotlight because chip shortages have been a drag on car production. But a number of tailwinds could give the industry an additional lift well after manufacturing normalizes.
Then there's the financial technology space.
"Fintech," which for a long time simply meant payment processors like Visa (V) and Mastercard (MA), was already expanding rapidly in an increasingly digitized world. But then COVID-19 hit, greatly accelerating the sector's development and – by extension – its growth prospects. Here, we look at 10 of the top opportunities for the fintech mega-trend.
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