The Dow Jones crushed the S&P 500 and Nasdaq today because value stocks seem to be finally making a comeback.
The Dow Jones Industrial Average (DJIA) went on a tear on Tuesday, thanks to a bevy of impressive moves from stocks outside the tech sector.
Glass-half-full earnings from Coca-Cola, alongside monster moves in Exxon Mobil and Chevron, delivered big wins for the U.S. stock market bellwether.
The U.S. stock market demonstrated broad strength today. Tech was the only sector to suffer a noteworthy decline, which explains why the Dow eclipsed its fellow indices ahead of the closing bell.
As of 3:23 pm ET, the Dow had gained 190.16 points or 0.71% to climb to 26,871.03.
The S&P 500 rose 0.29% to 3,261.16, while the Nasdaq slid 0.64% to 10,697.83.
It was a buoyant day for commodities. Silver (+7.3%), gold (+1.4%), and crude oil (+2.4%) all made big moves, weakening the U.S. dollar.
A natural side-effect of a weaker USD is a healthier environment for global growth. This mood usually helps to lift the Dow’s plethora of multinational corporations.
Tuesday was the second straight day without any major U.S. economic data releases. This allowed investors to focus their attention on the marathon E.U. summit that finally culminated in historic fiscal legislation.
Wall Street seems to care more about stimulus than the pandemic itself. Rising virus cases in the U.S. continue to have little impact on valuations, though a “testing crunch” could cause problems later in the year.
Donald Trump’s sudden U-turn on wearing masks looks to be good news for asset prices – if only because it shows a more united front between the White House and CDC.
The CDC had previously said the U.S. could contain its outbreak in as little as four weeks if everyone wore a mask.
In a comment shared with CCN.com, senior economist Sebastian Galy at Nordea Asset Management advised investors to turn sour on frothy tech stocks.
That’s significant. The firm has been bullish since the stock market crash in March, so there’s reason to heed Galy’s warning that growth stocks could “die in a burst of euphoria.”
We continue to suggest significant caution on growth stocks though suspect they will die in a burst of euphoria rather than pessimism as long-term profit expectations are completely unanchored from potential growth. In essence, the world believes intrinsically too much in the inherent virtue of the American economy.
With the Nasdaq on the back-foot today, it seems possible the massive rally in dividend stocks like Chevron and Exxon Mobil might represent some rotation into more value-oriented sectors.
On a strong day in the Dow 30, some of the least fashionable value names regained a bit of their former shine.
Chevron and Exxon Mobil led the way, surging 5.3% and 6.9% as crude oil enjoyed a bounce to $41.75.
Unwieldy food and beverage titan Coca-Cola posted a 2.4% rally, despite its sales plunging 33% in the last quarter. The silver lining for investors was management’s prediction that sales will rebound moving forward.
Clothing giant Nike rallied 2.8%, while the index’s heaviest weighted component, Apple, was one of the few stocks in the red. AAPL suffered a 1% loss.
Last modified: September 23, 2020 2:08 PM