Equities were mixed, with value stocks up significantly. The price of oil popped, and economic data confirmed continued strength in the economy.
Dow Jones Industrial Average
fell 3.09 points, or 0.01%, to close at 32,420.06. The
fell 21.33 points, or 0.55%, to end at 3,889.24, and the
tumbled 265.81 points, or 2.01% to close at 12,961.89. The biggest gainer in the S&P 500 was
Laboratory Corp. of America
(LH), which saw shares soar 4.9% after the life-sciences firm said it is reviewing ways to “unlock shareholder value.”
The S&P 500 ended in the red, while the Dow was essentially flat because the former index includes many technology companies, which slipped Wednesday. Also, the S&P 500 includes legacy-media firms
(DISCA) as components, which were the index’s two biggest losers by far Wednesday on disappointing news. Still, just over 60% of stocks on the S&P 500 rose, reflecting a broader optimism.
Growth technology stocks, which investors have been selling, are sensitive to changes in long-term interest rates because higher rates hurt the valuation of profits in the future. Rates took a back seat on the day, though, with the 10-year Treasury yield down a tick, though it has nearly doubled year to date. The interest rate, though, is still under the expected rate of inflation, so it’s likely to continue rising because bond investors ultimately demand a return that beats inflation. Firming inflation and economic demand favors mature companies in their earnings prime, and generally those are represented by value stocks.
(CVX), one such value stock, was the biggest gainer among Dow components, up 2.7%. The price of crude oil rose 5.1% to $60.72 a barrel after having dropped from a more than two-year high of $66 at the beginning of March. State reopenings and trillions of dollars of fiscal stimulus are boosting oil demand.
(CAT), a maker of heavy equipment that sees roughly a third of its revenue from energy customers according to FactSet, was the sixth-biggest gainer among Dow components with a 1.4% rise.
A surging price of oil is another indicator of firming economic demand, so cyclical names not directly exposed to oil had a strong day, as well. The
Industrial Select Sector SPDR
Fund (XLI) rose 0.7%. One factor that certainly didn’t hurt: a strong purchasing managers index reading. The Markit manufacturing PMI—a measure of orders and activity—came in at 59. That missed the mark for March by less than a point, but was more than last month’s reading of 58.6, and any reading over 50 means growth. Citigroup economists note recent “strong demand” as manufacturing activity has been in a sharp uptrend in the past several quarters. Most recent PMI readings have been materially above pre-pandemic levels of a tick over 50.
Bank stocks are also geared to the current economy, but because their loans are more profitable when rates rise, that group slipped today. The
SPDR S&P Bank
ETF (KBE) fell 0.5%, even though many expect rates to keep moving up. Banks have already had an enormous run, with the bank fund up more than 20% year-to-date.
Write to Jacob Sonenshine at firstname.lastname@example.org