Stock Market Today: Stocks Resume Rally on Strong Earnings, Economic Data

The major market indexes ran higher right from the start on Wednesday – and never looked back.

Helping boost investor sentiment were a pair of economic reports that indicated the U.S. economy is still growing. Data from the Institute for Supply Management this morning showed business activity in the services sector hit a three-month high of 56.7% in July.

"The ISM services index not only defied the consensus expectation for a decline, but rose by the most in five months in July," says Wells Fargo senior economist Tim Quinlan. "A jump in new orders bodes well for coming demand, and an array of measures suggests supply chain pressures continue to ease."

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A separate report showed factory orders were up 2% month-over-month in June, more than economists were expecting.

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A heavy dose of well-received corporate earnings reports added to the bullish buzz. Among the day's big post-earnings winners were drugmaker Moderna (MRNA, +16.0%) and fintechs PayPal Holdings (PYPL, +9.3%) and SoFi Technologies (SOFI, +28.4%).

Technology was the best-performing sector today, surging 2.7%. As such, the tech-heavy Nasdaq Composite outpaced its peers, rising 2.6% to 12,668. Still, the S&P 500 Index (+1.6% at 4,155) and Dow Jones Industrial Average (+1.3% at 32,812) posted solid gains. It was the first win this week for all three indexes.

Other news in the stock market today:

• The small-cap Russell 2000 spiked 1.4% to 1,908.
• U.S. crude futures plummeted 4% to finish at $90.66 per barrel after the Energy Information Administration posted a surprise rise in U.S. crude and gasoline inventories.
• Gold futures snapped their five-day winning streak, shedding 0.7% to end at $1,776.40 an ounce.
• Bitcoin rose 2.2% to $23,462.92. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Robinhood Markets (HOOD) jumped 11.7% today after the financial services platform said it was slashing its global workforce by roughly 23%, with most of the layoffs occurring in the operations, marketing and program management divisions. CEO Vlad Tenev said the cuts come amid a "deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash." The company also reported a slimmer-than-expected per-share loss of 34 cents in its second quarter, while revenue of $318 million came in above the consensus estimate. While the layoffs are the headline of the report, says Mizuho Securities analyst Dan Dolev (Buy), the fundamentals show more positives than negatives – including higher quarter-over-quarter sales and average revenue per user. "We believe that once the market digests the 'shock' from the layoff's sheer size, investors will shift focus to fundamentals and path to profitability, which may even result in the stock trading higher tomorrow," Dolev adds.
• Not all of today's earnings reactions were positive. Match Group (MTCH) tumbled 17.6% after the online dating app provider reported lower-than-anticipated revenue of $795 million for its second quarter. The company also gave weak current-quarter revenue guidance and said Tinder CEO Renate Nyborg is leaving. Still, Jefferies analyst Brent Thill maintained a Buy rating on MTCH stock. "In our view, third-quarter revenue guidance is likely conservative to account for potential disruptions," Thill says. "We believe the new [Match Group] CEO Bernard Kim's heightened focused on faster product innovation, an expedited Hinge international rollout and improving monetization at Tinder will be key catalysts for driving accelerating revenue growth in fiscal 2023."

Don't Give Up on Bonds Just Yet

Long live the 60-40 portfolio! So says Douglas Beath, global investment strategist for Wells Fargo Investment Institute.

Many pundits have declared the traditional portfolio structure – which dictates you allocate 60% to stocks and 40% to bonds – as obsolete following a more than 16% decline in both the S&P 500 and the Bloomberg U.S. Aggregate Bond Index in the first half of 2022.

But Beath says that while "this year in capital markets is unusual," such calls are "greatly exaggerated," and in fact the 60-40 portfolio "will continue to be an effective strategy for investors." The strategist points to historical returns of bonds, which have provided a "significant hedge" during periods of market volatility, as well as attractive valuations following the recent downturn. And this is why the model is alive and well and continues "to serve as a solid foundation for long-term investors."

While investing in individual bonds is impractical for most retail investors, bond funds and bond ETFs allow them to gain exposure to fixed-income assets. Here, we've compiled a list of the 10 bond funds to buy now that cover a wide variety of categories and create diversification for income investors.