Shares closed higher on Wednesday as bargain hunters rushed after a long stretch of losses for major indexes.
Today’s positive price action came as 10-year Treasury yield fell from yesterday’s two-month high, ending down 6.7 basis points at 3.273%. A basis point is equal to one hundredth of a percentage point.
And the buying persisted even after Federal Reserve Vice Chairman Lael Brainard said in an early afternoon speech that the central bank was “in it for as long as it takes to make lower inflation”. The Fed will meet later this month, with the market widely pricing in the likelihood of a third straight 75 basis point rate hike.
Almost all sectors finished better, with utilities (+3.1%) and consumer discretionary stocks (+3.1%) in the lead. The only outlier was energywhich fell 1.2% while U.S. Crude Futures fell 5.7% to $81.94 a barrel – their lowest level since Jan. 11, according to Dow Jones Market Data – amid expectations of slowing global economic growth. “Today’s oil outage is a bigger blow forward, indicating further headwinds ahead in our view,” said Dan Wantrobski, technical strategist and associate director of research at Janney Montgomery Scott. “We think the commodity can break below $80 from here, targeting the $70 range in the coming weeks.”
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With regard to the main indices, the Nasdaq Compound jumped 2.1% to 11,791 – ending its seven-day losing streak, its longest since 2016. S&P 500 Index (+1.8% to 3,979) and the Dow Jones Industrial Average (+1.4% to 31,581) also posted impressive gains.
Other news on the stock market today:
- Small cap Russell 2000 rose 2.2% to 1,832.
- Gold Futures Contracts gained 0.7% to end at $1,727.80 an ounce.
- Bitcoin reached $19,183, before falling back to $19,011.19, up 1% from the same time yesterday. (Bitcoin trades 24 hours a day; prices shown here are as of 4 p.m.)
- Twitter (TWTR) rose 6.6% after a report in The Wall Street Journal said a Delaware judge ruled that Elon Musk was allowed to include whistleblower allegations against the social media company in his countersuit. However, the judge denied Musk’s request to push the trial back to November from its currently scheduled October 17 date. Twitter is suing Musk over his attempt to walk away from a $44 billion deal to buy the company, while Tesla (TSLA) CEO in a countersuit accused TWTR of misrepresenting key metrics of his business. “While we believe the whistleblower comments give Musk some hope in the upcoming trial while adding slightly greater uncertainty, we believe it will ultimately be moot and will continue to see strong probability that TWTR will be victorious in court,” said Angelo Zino, research analyst at CFRA (Hold). “We still believe that the most likely outcome is a purchase of TWTR by Musk, either forced by the courts or a settlement at a discount of less than 15%-20%.”
- Coupa Software (COUP) jumped 17.9% after the company, which offers cloud-based business expense management software, reported earnings. In its second quarter, COUP saw quarterly subscription revenue increase 23% year-over-year to a record $193 million, helping to push total revenue up 18%. % to $211 million. The company also said its board had approved a $100 million share buyback program. UBS Global Research analyst Taylor MicGinnis called the results “strong” but maintained a neutral (holding) rating on the stock, citing a “more reasonable” valuation at current levels given “higher visibility limited beyond short-term adolescent growth”.
Stay focused on the big picture
Uncertainty over the size of the Federal Reserve’s next rate hike will continue to rock markets until the central bank’s next policy meeting, scheduled for September 20-21. That makes tomorrow morning’s speech by Fed Chairman Jerome Powell a key event to watch, and one that could potentially trigger more volatility for stocks.
But savvy investors know that these short-term ups and downs are just noise compared to the big picture. “At the end of the day, the day-to-day machinations of the market only matter to the extent that we allow them to,” says Ross Mayfield, investment strategy analyst at Baird. “Volatility and sell-offs – in all their shapes and sizes – are just a reality for the long-term stock owner to bear.”
Indeed, investors can take advantage of off-peak days to gradually increase the holdings of their core portfolio. You do not know where to start ? How about those solid blue-chip stocks or checking out some of Wall Street’s top dividend-payers. For investors who want a broader approach, may we suggest the Kip 25. This list of Kiplinger’s favorite low-cost mutual funds boasts strong long-term performance and managers with matching mandates. Check them.