The markets kicked off a holiday-shortened trading week by celebrating the likely continuation of Jerome Powell as the Federal Reserve's chair, but the party streamers ran out by the closing bell.
President Joe Biden did what pundits largely expected Monday, nominating Powell for another four-year term as the head of America's central bank as it navigates a period of rising inflation. That sent a jolt through several areas of the market in the morning, most noticeably financials (+1.4%) and energy (+1.8%).
"Powell's renomination removes a potential negative from the markets and provides the certainty that investors crave. Powell is sound, tested, respected and familiar to markets," says George Ball, chairman of investment firm Sanders Morris Harris.
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Looking ahead, BMO Capital Markets Senior Economist Jennifer Lee notes that "with the possibility of an even more dovish Fed Chair now off the table (Lael Brainard will be vice-chair), the possibility of a sooner Fed rate hike in 2022 has risen."
However, all of the major indices turned tail late in the session, giving up most or all of their early gains. The Dow Jones Industrial Average squeaked by with a marginal gain to 35,619. The S&P 500 – on pace to set a new record high for most of the day – lost 0.3% to 4,682, and the Nasdaq coughed up 1.3% to finish at 15,854.
The Nasdaq might have been even worse if not for strong performances from some of its mega-caps, including Tesla (TSLA), which finished up 1.7%. Indeed, the "FAANGs" and other very large Nasdaq stocks have been papering over difficult years for many of the composite's smaller members.
Liz Ann Sonders, chief investment strategist at Charles Schwab, notes on Twitter that the average maximum year-to-date drawdown for Nasdaq components has reached 40%. And year-to-date, just 63% of the Nasdaq's stocks are sitting on positive year-to-date returns, versus 83% of the S&P 500.
Other news in the stock market today:
- The small-cap Russell 2000 declined 0.5% to 2,331.
- U.S. crude futures rose 1.1% to settle at $76.75 per barrel.
- Gold futures fell 2.4% to finish at $1,806.30 an ounce.
- Bitcoin dropped alongside equities, declining 3.6% to $55,794.50. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
- General Motors (GM) popped 3.7% on news it took a 25% stake in Pure Watercraft. The Seattle-based startup makes all-electric outboard motors for boats. As part of the deal, GM will supply the company with parts and will provide advice on engineering, design and manufacturing.
- Blink Charging (BLNK) plunged 11.3% after Cowen analyst Gabe Daoud downgraded the electric vehicle (EV) charging equipment stock to Market Perform from Outperform (the equivalents of Neutral and Buy, respectively). The analyst cited BLNK's valuation as a reason for the downgrade, with shares rallying nearly 62% from early October through last Friday's close to trade at a price-to-earnings (P/E) ratio of 110.9.
Don't Just Collect More Income ... Collect It More Often
Income is a vital component to just about any retirement investing strategy. You'll be hard-pressed to find anyone who challenges that concept … and you don't need to worry, because we're not about to, either.
But chances are many retirement planners and retirees could better tailor their holdings to their needs.
When people call it a career, little changes about their bills – the mortgage, the power bill, the car payment still come each and every month. But their income is another story. If you take a look at most dividend stocks – even the vast majority of the creme de la creme, the Dividend Aristocrats – they tend to only pay once a quarter, or in some cases even once or twice a year. That forces many retirees to build complicated portfolios, mixing and matching stocks in a particular way just to ensure an even monthly dividend check.
But a few investments take the load off your shoulders. For one, bond funds are much more likely than stock funds to deliver monthly distributions. And if you do crave the mix of dividends and growth you can get from equities, you can indeed collect income every 30 days or so from a small number of monthly dividend stocks.
We've recently highlighted a dozen monthly dividend payers, and for the most part, there's nothing fundamentally different about them – management simply sees the value in rewarding shareholders every month, which provides a type of income stability few other investments can.
Kyle Woodley was long TSLA as of this writing.
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