Stocks got off on the wrong foot Wednesday and never quite recovered as investors continued to weigh the Federal Reserve's signals about pulling back on stimulus, as well as the state of the economy.
In an interview with the Financial Times, St. Louis Fed president James Bullard said that the central bank shouldn't waver on plans to taper its asset purchases before the end of the year despite last Friday's surprisingly disappointing August jobs report.
"There is plenty of demand for workers and there are more job openings than there are unemployed workers," he told FT.
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Later in the day, the Fed's "Beige Book" – a regular report of anecdotal economic information – acknowledged that "economic growth downshifted slightly to a moderate pace in early July through August." But investors seemingly shrugged it off, with stocks broadly maintaining their levels after the release.
Declines in Dow Inc. (DOW, -1.9%) and UnitedHealth Group (UNH, -1.4%) sent the Dow Jones Industrial Average to its third straight decline – a modest 0.2% retreat to 35,031. The S&P 500 (-0.1% to 4,514) and Nasdaq Composite (-0.6% to 15,286) also finished in the red.
When investors were buying, they were buying safety, with the utility (+1.8%) and consumer staples (+0.9%) sectors coming out on top Wednesday.
Other news in the stock market today:
- The small-cap Russell 2000 dropped 1.1% to 2,249.
- Cryptocurrency exchange operator Coinbase (COIN, -3.2%) saw its shares decline after the company revealed that it had received a notice of possible enforcement action from the Securities and Exchange Commission. "Last Wednesday, after months of effort by Coinbase to engage productively, the SEC gave us what's called a Wells notice about our planned Coinbase Lend program," Chief Legal Officer Paul Grewal wrote in a Tuesday night blog post. The Coinbase Lend program would allow users to contribute to a lending pool centered around the stablecoin USD Coin, and receive a 4% interest rate in return.
- U.S. crude futures improved by 1.4% to $69.30 per barrel as Gulf Coast production struggles to get back online in the wake of Hurricane Ida.
- Gold futures slid yet again, off 0.3% to $1,793.50, as the U.S. dollar strengthened.
- The CBOE Volatility Index (VIX) slipped 1.0% to 17.96.
- Bitcoin pulled back by 0.5% to $46,453.95. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Commodities Aren't Feeling the Pinch
What else did the Beige Book tell us?
"The lack of market reaction today shows that much of these concerns are priced in," says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "But a larger market pullback – which may materialize this fall either as a result of tapering announcements or other, potentially unexpected news – should provide an opportunity to re-enter positions in travel, leisure and hospitality as the recovery is most likely delayed and not cancelled completely."
That dovetails with our thoughts yesterday that the road travel stocks and other recovery picks are following looks rocky (but could ultimately be rewarding).
But one area of the market that still appears strong is commodity prices.
"Most districts noted substantial escalation in the cost of metals and metal-based products, freight and transportation services, and construction materials," the Fed says – and that's good news for commodity stocks and the broader materials sector. Companies dealing in steel, aluminum, copper and other commodities can go through nauseating boom-and-bust cycles, but the current environment continues to be in their favor.
Here, we look at seven commodity stocks that should have plenty more potency once the recovery gets back on steadier legs.
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