One might have expected a pause in equities after yesterday’s widespread resurgence – after all, that has been stocks’ M.O. throughout 2022’s bear market. And that’s exactly what we got after stocks reversed a morning slump, then let an afternoon rally slip away right before Wednesday’s close.
Just like Tuesday, there was no definitive driver for today’s action – just a market trying to determine what’s next amid a Texas plain’s worth of headwinds.
“This week is a relatively slow one for economic data,” says Lauren Goodwin, economist and portfolio strategist at New York Life Investments, “but we expect market volatility to continue as investors wait for signs that inflation and interest rates will stabilize.”
One of the most critical things on the mind of investors is the potential for a looming recession. Darrell L. Cronk, president of the Wells Fargo Investment Institute, fears we might already be there.
“The Atlanta Fed’s GDPNow tracker, typically tilted toward optimistic readings, is signaling that U.S. gross domestic product (GDP) for the second quarter of 2022 is now tracking at 0%,” he says. “Following a 1.5% contraction in the second estimate of first-quarter U.S. GDP, we are dangerously close to lacing together two consecutive quarters of GDP contraction, which translates into a technical recession, according the National Bureau of Economic Research.”
Where the market was up, it was largely a push into yield-friendly defensive sectors. Real estate (+1.6%), healthcare (+1.4%) and utilities (+1.1%) were Wednesday’s best performers.
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Energy stocks (-4.0%) such as Exxon Mobil (XOM, -4.0%) and Chevron (CVX, -4.4%) were pummeled, however; the aforementioned recessionary fears – not just domestically, but across the world – caused U.S. crude oil prices to fall by 3.0% to $106.19 per barrel.
The Dow Jones Industrial Average (-0.2% to 30,483), Nasdaq Composite (-0.2% to 11,053) and S&P 500 (-0.1% to 3,759) all finished the day with minimal losses.
Other news in the stock market today:
The small-cap Russell 2000 slipped 0.2% to 1,690.Gold futures posted a marginal loss to end at $1,838.40 an ounce.Bitcoin took a considerable step back, dropping 3.7% to $20,111.62. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) Is Revlon (REV) the new meme stock? REV stock bottomed just above the $1 per share mark on June 13 – three days before the cosmetics company filed for Chapter 11 bankruptcy protection. But shares have since shot up more than 700% since then, including today’s 34.3% pop that had the stock closing at $8.14. Many press reports point to similarities with Hertz Global (HTZ), which saw a major share-price surge after it filed for bankruptcy in May 2020. Heavily shorted REV stock – more than half of its float is sold short – has also caught the eye of Reddit users recently, a combination that sparked major volatility for GameStop (GME, -1.3%) shares back in early 2021.Altria (MO) tumbled 9.2% after a report in The Wall Street Journal suggested the Food and Drug Administration (FDA) is getting ready to order Juul Labs to remove its e-cigarettes from U.S. markets, with people familiar with the matter saying a decision could be delivered as early as Wednesday. MO has a 35% stake in Juul. Also weighing on tobacco stocks today was news that the Biden adminstration is preparing a plan that will propose eliminating nearly all nicotine in cigarettes – a move that could seriously curb revenue for the companies that make them. As such, MO stock was joined in negative territory by Philip Morris International (PM, -0.9%), Vector Group (VGR, -2.2%) and British American Tobacco (BTI, -1.3%).Do You Have a Bear Market Strategy?Counterintuitively, once the market actually jumps into bear-market territory is when investors might want to start adopting a slightly more optimistic point of view.
“Historically, when confidence was this low, the bear was close to expiring, and, looking ahead the next 12 months, it typically signifies a uniquely positive occasion for stock investors,” Jim Paulsen, chief investment strategist at the Leuthold Group, recently said to Kiplinger Executive Editor Anne Kates Smith.
And indeed, she points out, corporate insiders have put their foot on the gas of late.
Nonetheless, how you tread from here largely depends on what you think is just around the bend. The more pessimistic among us might consider suiting up to battle the bear – and these 12 exchange-traded funds (ETFs) are designed to do just that, typically gaining (or at least losing less) in a broad downturn. However, our best stocks for the rest of the year – a group of 15 rebound candidates – are more suited for those with a persistent inner bull.
Either way, we recommend you mentally prepare yourself by reading our latest examination of how to invest intelligently while the bears are on the prowl.