The Dow eked out a gain of 16 points, but most stocks in the S&P 500 fell. Shares of electric-vehicle giant Tesla are still in a bear market.
Stocks were mixed Wednesday, but didn’t move much. The market has had quite a run and many stocks are taking a breather.
The Dow Jones Industrial Average rose 16.02 points, or 0.05%, to close at 33,446.26, after spending much of the day in the red. The S&P 500 added 6.01 points, or 0.15%, to end at 4,079.95, while the Nasdaq Composite fell 9.54 points, or 0.07%, to close at 13,688.84. The biggest gainer in the S&P 500 was L Brands (ticker: LB), the parent of Victoria’s Secret, which saw shares rise 3.7% on an analyst upgrade.
Meanwhile, ultra-growth stocks got hammered. Tesla (TSLA) stock is still in a bear market after setting a record in January; shares of the electric-vehicle giant fell 3% Wednesday. Shares of videoconferencing giant Zoom Video Communications (ZM), down more than 40% from an all-time high in October, fell another 2%. The rise in longer-dated interest rates are denting these shares because the firms expect the bulk of their profits in the long term, and their current valuations are vulnerable to higher rates.
Shares of more-mature growth companies performed well, however. Apple (AAPL), Facebook (FB), and Alphabet (GOOGL) rose 1.3%, 2.3%, and 1.3%, respectively. The Nasdaq 100, an index including large-capitalization technology stocks, rose 0.28%.
Stocks are pricing in a lot of good news, as fiscal stimulus and reopenings move the economy ahead. In the last 30 days, including Wednesday’s performance, the Dow and S&P 500 are up 5% and more than 6%, respectively. Stock valuations are rich, while interest rates have climbed, which reduces the appeal of stocks relative to bonds. And the rally has lifted many sectors—which means stocks have some downside; 86% of S&P 500 stocks were trading above their 50-day moving averages Tuesday, according to Canaccord Genuity data. The weakness on Wednesday was almost as broad as the market surge; 61% of S&P 500 stocks fell, according to FactSet data.
This all comes in the absence of any material developments or changes in the economic outlook. Trillions of dollars of fiscal stimulus is already in circulation. President Joe Biden’s $2 trillion-plus infrastructure plan contains not many positive surprises. The Federal Reserve commented Tuesday afternoon, but didn’t reveal anything new. First-quarter earnings season hasn’t begun yet, though investors will be focused on the bottom lines and guidance when companies start reporting.
As for the Fed, stocks didn’t even react to the central bank’s largely positive messaging, suggesting they’re far from cheap. The Fed didn’t hint at higher interest rates any time soon. “There appears to be no hidden interest in higher rates, suggesting that rates will indeed remain low until unemployment drops down to pre-pandemic levels,” wrote Brad McMillan, chief investment officer for Commonwealth Financial Network, in emailed remarks to the press. Even with that backdrop, stocks couldn’t gain much traction on the day.
“Investors may have their sights on what the next catalyst will be to move stocks, as the market has pretty much flatlined this week—not a bad thing as we sit at record highs,” Mike Loewengart, managing director of investment strategy at E*Trade, wrote in an email.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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April 08, 2021 at 04:01AM
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Why Did the Stock Market Go Nowhere? Tesla and Growth Got Crushed. - Barron's
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