Stocks finished with little movement for a second consecutive session Wednesday, held in check by lackluster trading in big tech stocks.
Although Tesla (TSLA, -5.3%) tumbled on reports that competitor Rivian is preparing an initial public offering and Twitter (TWTR, +13.2%) reached a seven-year high thanks to strong first-quarter user growth, the biggest names in the sector — Microsoft (MSFT, -0.4%), Apple (AAPL, -0.5%), Alphabet (GOOGL, +0.5%) and Amazon.com (AMZN, -0.6%) — hardly budged.
By the day’s end, the blue-chip Dow Jones Industrial Average rose 0.2% to 31,438, eking out another record close. The broader S&P 500 retreated 0.03% to 3,909, while the tech-heavy Nasdaq Composite fell 0.3% to 13,972.
Other action in the stock market today:
- The small-cap benchmark Russell 2000 slipped 0.7% to 2,282.
- The U.S. Dollar Index added 0.01% to 90.43.
- U.S. crude oil futures improved by 0.1% to $58.43 per barrel.
- Gold futures extended their winning streak to four sessions, gaining 0.3% to $1,843.40 per ounce.
Is a Rotation Out of Bonds Good for Dividend Stocks?
In a speech on Wednesday, Federal Reserve Chairman Jerome Powell signaled a commitment to low interest rates, suggesting inflation should remain in check — albeit temporarily on the rise as the economy recovers. (Kiplinger’s is forecasting 2.3% inflation in 2021, up from 2020’s rate of 1.4% but right in line with 2019’s 2.3%.) The yield on the benchmark 10-year Treasury note — which reflects inflation expectations — is back to levels last seen in March 2020.
For fixed-income investors, dividend growth stocks can easily keep up with mild inflation and fulfill a need for income, too.
“Another potential stock-market driver is rotation out of bonds, which shows signs of accelerating,” writes Jim Kelleher, director of research at Argus Research. “At some point, rising yields will attract income-hungry retail investors who want to replace volatile equity exposure with something more certain.”
Utility stocks are a good place to look for generous yields and will benefit from increased energy use. Real estate investment trusts (REITs) should likewise generate outsized gains in a recovery to become an equity income investor’s best friend.
As for long-term equity income investors, they can’t go wrong with companies that have raised their dividends every year for decades. Known as the Dividend Aristocrats, have a look at 65 top dividend stocks for the year ahead.