Investors returned to their desks Tuesday for a holiday-shortened week of trading stocks with little to guide them. No major U.S. economic data releases were slated for today (and few are on deck this week). And the Q2 earnings slate is thinning out.
However, BMO Capital Markets Senior Economist Sal Guatieri notes that this week, "there will be plenty of Fed chatter to mull over, with no less than eight officials hitting the podium."
"Recent talk has landed on the positive side of the ledger, including from the Chair," he adds. "Any fading optimism would push a taper announcement to later this year."
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So what influenced stocks on Tuesday?
The predominant driver seemed to be a slew of U.S. GDP estimate downgrades in the wake of last week's jobs report and rising concerns about the COVID-19 Delta variant. BMO shaved its forecasts for both Q3 growth (to 5.0% from 6.0%) and Q4 (to 4.0% from 5.0%). Other analyst firms, such as Morgan Stanley and Goldman Sachs, also lowered their expectations.
The industrial sector (-1.8%) led the way lower, with Dow Jones Industrial Average components 3M (MMM, -4.5%) and Honeywell (HON, -2.4%) contributing to the DJIA's 0.8% decline to 35,100. The S&P 500 finished with a thinner loss, off 0.3% to 4,520.
However, the Nasdaq Composite managed to squeeze out its fourth consecutive record close – a marginal gain to 15,374. It was helped by Apple (AAPL, +1.6%), which hit another all-time high after announcing a Sept. 14 event where it's widely expected to reveal the iPhone 13 and other product updates.
Other news in the stock market today:
- The small-cap Russell 2000 dipped 0.7% to 2,275.
- Moderna (MRNA, +4.7%) shares recorded their fifth consecutive gain in the wake of a massive price-target upgrade from Morgan Stanley analyst Matthew Harrison. “We continue to see COVID-19 revenues declining over time, but we do not see that starting to happen until 2023/2024 versus our prior estimate of 2022,” says Harrison, who raised his price target to $337 per share from $190 previously. “We have also added in the potential for a combination COVID/respiratory vaccine.”
- U.S. crude futures declined 1.4% to $68.35 per barrel.
- Gold futures also retreated amid a strong U.S. dollar, settling 1.8% lower to hit $1,800.40 per ounce.
- The CBOE Volatility Index (VIX) jumped 9.6% to 17.98.
- Bitcoin, in what might have been a "buy the rumor, sell the news" event, took a big intraday dive on Tuesday as it became legal tender in El Salvador. Bitcoin, which dropped below $43,000 at one point, finished at $46,709.91 – still a 7.4% decline from Friday's levels. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Be Cautious on Recovery Plays, But Don't Shun Them
"Delta is a material wild card." So says a team of JPMorgan Securities global equity strategists reflecting on the current environment for stocks.
Consider the situation here in the U.S.: Vaccination rates continue to crawl higher, but only 53% of the population (and 64% of adults) is fully immunized against COVID. Medical resources are being stretched thin again, with the country recently surpassing 100,000 COVID-related hospitalizations every day. But at the same time, Wall Street analysts largely agree there will be no return to 2020-esque shutdowns.
From an investing standpoint, this means so-called "recovery stocks" could still deliver additional rewards down the road – though some patience might be required. That's especially true in the travel sector.
"The rise in COVID cases attributed to the Delta variant has weighed on the spending in categories such as restaurants, lodging and airlines," say JPMorgan's strategists. "However, we expect consumer spending in these sectors to rebound strongly as things stabilize."
If you think you have the stomach for it, here are five travel stocks that could make the wait worth it. Each of these picks offers something to set them apart, whether that's a business model that's right for the times, a bulletproof balance sheet to help them wait out more COVID turbulence, or other competitive advantages. Check them out.
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