Market

Dow Jumps 300 Points As Stocks Kick Off Worst Six Months Of The Year

Topline

Kicking off a historically lackluster period for stocks, the market is once again soaring back toward record highs Monday as experts keep a close eye on the Federal Reserve, which helped intensify a Friday selloff due to concerns it could finally ease up on its pandemic-era economic support.

Key Facts

As of 9:50 a.m. Monday, the Dow Jones Industrial Average was soaring 320 points, or 0.9%, while the S&P 500 jumped 0.6% and the tech-heavy Nasdaq 0.2%.

Confirming recent reports, Verizon announced Monday morning it will sell its internet assets—including Yahoo and AOL—to private equity firm Apollo Global Management for $5 billion (it paid nearly a combined $9 billion for both in 2015 and 2017); shares of Apollo jumped 1.3% Monday morning, Verizon 0.4%.

Heading up gains in the Dow, shares of American Express, Goldman Sachs and Honeywell are climbing 1.1%, 0.8% and 0.8%, respectively, recouping losses from a Friday selloff that helped push the index down 0.5% last week.

On the earnings front, makeup giant Estée Lauder reported lower-than-expected quarterly sales of $3.9 billion before the market opened, pushing shares down 4% for the S&P’s biggest decline Monday morning.

In another sign of concerning inflation on the horizon, shares of Clorox are falling 2% after the company warned Friday of an “increasingly elevated cost environment” that forced it to cut its earnings expectations for this year.

Shares of Nasdaq-listed Moderna, meanwhile, are rising 3%, thanks to a newly announced deal with Gavi, a United Nations-backed vaccine alliance, to supply up to 500 million doses of the company’s Covid-19 vaccine to low- and middle-income countries through next year.

Crucial Quote

“Stocks are up more than 87% from the March lows, suggesting a well-deserved pullback during these troublesome months is quite possible,” LPL Financial chief market strategist Ryan Detrick said in a weekend note. “But with an accommodative Fed, fiscal and monetary policy, along with an economy that is opening faster than nearly anyone expected, we’d use any weakness as an opportunity to add to positions.”

Key Background

Stocks keep nabbing new record highs this year, but not without bouts of volatility. Intensifying an end-of-week selloff, Dallas Fed President Robert Kaplan said Friday that he thinks the Fed should start discussing when it will stop buying $120 billion in assets each month to help prop up economic growth. The Fed insists it will continue the purchases until the economy reaches full employment and inflation exceeds its annual 2% target. “I think we’re going to reach that benchmark sooner than I would have expected in January,” Kaplan said. Experts believe the Fed could start the tapering discussion at its next Federal Open Market Committee meeting in June—something that’s sure to test the market’s strength.

Surprising Fact

The six months beginning in May are historically the worst six months of the year for stocks, climbing an average of only 1.7%. “To add insult to injury, we are leaving the six most bullish months of the year,” says Detrick, noting that the S&P gained close to 30% since December—one of the best six-month gains ever.

What To Watch For

Big earnings this week include Pfizer, Activision Blizzard, Ferrari and Lyft on Tuesday—followed by PayPal, Uber and GM on Wednesday. Square, Moderna, Roku and Anheuser-Busch are all later in the week.

Tangent

In response to a slew of regulatory scrutiny following announced IPO plans, Fidelity marked down high-flying Ant Financial’s valuation by more than half, the Wall Street Journal reported Monday morning, giving the company—which Fidelity bought into three years ago—an implied $144 billion valuation at the end of February, down from private-market valuations of more than $300 billion at the end of last year.

Further Reading

S&P 500 Pulls Back From Record Highs, Dow, Nasdaq Slip, As Investors Take Profits From Week’s Bonanza Earnings Results (Forbes)

Inflation’s Mixed Basket: 7 Things That Will Cost You More—And 3 That Will Cost You Less—In The Covid Recovery Economy (Forbes)

From Lumber To TIPS To Bitcoin: 12 Inflation-Hedging Investment Moves (Forbes)

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