Stock Market Today: Stocks Wave Off Recession Worries

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Stocks posted solid gains for a second straight day on Thursday, even as preliminary data showed the U.S. economy contracted 0.9% in the second quarter.

The latest report from the Commerce Department marks back-to-back quarterly declines in gross domestic product (GDP), and sparked a whirlwind of recession chatter on Wall Street.

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"Two consecutive quarters of negative GDP meets our humble definition of a recession," says Dan Eye, chief investment officer at financial advisory firm Fort Pitt Capital Group. "But we agree with the view that labor market strength and a well-positioned consumer limits the severity of the economic contraction." Eye adds that the market sees lower odds of a third 75 basis-point rate hike (a basis point is one-one hundredth of a percentage point) at the Federal Reserve's September meeting and is beginning "to price in interest rate cuts as early as February 2023."

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Earnings were also in focus today. Meta Platforms (META) plummeted 5.2% after the Facebook parent said revenue declined 1% year-over-year in the second quarter to $28.8 billion – below what Wall Street was expecting. The company's earnings also came up short, as did its current-quarter revenue forecast.

"This is the first quarter ever that META is reporting declining revenue growth from a year ago," says David Wagner, portfolio manager at financial advisory firm Aptus Capital Advisors. "You couple this with the fact that guidance is substantially lighter than expected is why the stock is lower." Wagner adds that "given the market's focus on profitability, we like the fact the company has slowed down egregious spending in products that appear to be black holes."

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Ford Motor (F), on the other hand, jumped 6.1% after the automaker said Q2 operating income nearly tripled on a year-over-year basis to $3.7 billion. F also hiked its quarterly dividend by 50% to 15 cents per share.

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The major indexes managed to shake off some early morning weakness to finish near their session highs. The Dow Jones Industrial Average gained 1% to 32,529, the S&P 500 Index rose 1.2% to 4,072 and the Nasdaq Composite climbed 1.1% to 12,162.

Other news in the stock market today:

The small-cap Russell 2000 gained 1.3% to 1,873.
U.S. crude futures fell 0.9% to settle at $96.42 per barrel.
Gold futures jumped 1.8% to $1,750.30 an ounce.
Bitcoin soared 4.5% to $23,798.25. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
Spirit Airlines (SAVE) rose 5.6% after the discount airline said it ended merger talks with Frontier Group Holdings (ULCC, +20.5%), instead accepting the $3.8 billion buyout offer from JetBlue Airways (JBLU, -0.4%). "The companies will have an uphill battle convincing regulators that this deal should be approved," says Chris Pultz, portfolio manager for alternative investment firm Kellner Capital. "The Biden administration has been vocal about competitiveness in the airline industry, and this will not be looked upon favorably."
Qualcomm (QCOM) sank 4.5% after the wireless technology company gave current-quarter guidance that fell short of the consensus estimate, citing a "challenging macroeconomic environment." This overshadowed QCOM's higher-than-expected earnings of $2.96 per share and revenue of $10.9+ billion for its fiscal third quarter. Still, Argus Research analyst Jim Kelleher maintained a Buy rating on the tech stock. "QCOM has slightly outperformed peers during the tech sector selloff, reflecting the enduring strength of its silicon products and IP portfolio, and in our view continues to offer exceptional value," he says.

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Stock market gains from the past two days have brought some relief to investors, but worries over a potential recession will likely keep the roller-coaster ride going for the time being. Still, "investors should stay invested through the volatility and try to navigate into areas of the market that are more likely to provide downside protection in the volatile months ahead," says Gargi Chaudhuri, head of iShares investment strategy.

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To weather the storm of a turbulent market, economic slowdown risks and high inflation, she says investors should gain exposure to "companies with strong balance sheets and the ability to pass on higher costs to consumers," which could help cushion a portfolio.

For that, there are plenty of single-stock plays for investors to choose from, like these companies with pricing power or these steady dividend growers. For those who want broad diversification, consider exchange-traded funds (ETFs) – which allow investors to build a core portfolio or make tactical moves across a basket of assets. But with thousands of ETFs to choose one, it can get overwhelming. Here, we've narrowed the list down to 20 of our favorite funds, which we call the Kip ETF 20. The exchange-traded funds featured here offer a variety of strategies for investors, at low costs to boot.

Disclaimer

Karee Venema was long F as of this writing.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.