A pair of the major stock indexes registered record closes on Thursday, and they did so in the face of middling economic signals.
The Commerce Department revealed that U.S. gross domestic product grew by an annualized 6.5% rate during the second quarter – a figure that Barclays economists deemed “solid, but unspectacular and below expectations [of 8.4%].”
“Private consumption surged 11.8%, yet bottlenecks held back production and inventories were a drag on growth,” they add. “Chip shortages restrained motor vehicle output and rising home prices likely crimped demand for housing.”
Unemployment-benefits filings for the week ended July 24 were lower than the week prior, but only by about 24,000 claims to 400,000 – 15,000 claims higher than expected. And pending home sales for June declined by 1.9% month-over-month, disappointing economists who collectively were looking for a 0.3% improvement.
The Q2 earnings calendar was a bright spot yet again, however.
Qualcomm (QCOM, +6.0%) reported that profits more than doubled in its most recent quarter. Mastercard (MA, +1.4%) beat earnings and revenue forecasts, and Ford (F, +3.8%) announced a surprise quarterly profit that allowed the automaker to boost its full-year guidance.
The Dow Jones Industrial Average closed up 0.4% to a record 35,084, while the S&P 500’s 0.4% gain brought it to an all-time high of 4,419. The Nasdaq Composite improved by 0.1% to 14,778, 59 points shy of its July 23 highwater mark.
Other news in the stock market today:
The small-cap Russell 2000 gained 0.7% to 2,240.
Robinhood (HOOD) began trading today after pricing its initial public offering (IPO) at $38 per share last night – the low-end of its expected range – which valued the investing platform at $26.7 billion. HOOD shares opened at their IPO price before falling all the way down to $33.35. They eventually climbed up to $40.22, but closed well below here at $34.82. One aspect of HOOD’s market debut that made it unique is that it set aside 20% to 35% of its IPO shares for its own clients, which “will likely represent the first IPO experience for many individual investors,” says David Keller, chief market strategist at StockCharts.com. “Given the influx of inexperienced investors in this particular IPO, that means an environment ripe for behavioral biases such as overconfidence and confirmation bias. I would focus on where HOOD trades relative to its listing price of $38, because if the price starts to dip below that level, I could see investors reacting emotionally and irrationally when they realize IPOs can go down!”
Nikola (NKLA) was also in focus today after a federal grand jury indicted Trevor Milton, founder of the electric vehicle (EV) company, on two counts of securities fraud and wire fraud, saying he “brazenly and repeatedly used social media, and appearances and interviews on television, podcasts and in print, to make false and misleading claims” about the company. He was also hit with fraud charges from the Securities and Exchange Commission (SEC). Milton resigned as chairman of Nikola last September, and a statement from his legal team says he is being “wrongfully accused.” NKLA shares slumped 15.2%.
U.S. crude oil futures surged 1.7% to settle at $73.62 per barrel – their loftiest close in more than two weeks.
Gold futures jumped 1.7% to finish at $1,835.80 an ounce. It was the malleable metal’s highest settlement since mid-June.
The CBOE Volatility Index (VIX) declined again, by 3.3% to 17.70.
Bitcoin prices slid 1.4% to $39,730.22. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Second Verse, Not as Great as the First
One troubling undercurrent among these positive earnings reports, however: Suggestions that the second half of the year won’t be so explosive.
Apple (AAPL) reported Street-beating earnings on Tuesday, yes, but it also warned of slower growth throughout the rest of 2021. This happened with Facebook (FB, -4.0%) too: It topped expectations on both the top and bottom lines, but CFO David Wehner said year-over-year revenue growth will slow because the second half of 2020 was so strong.
While this problem won’t extend across the entire market, it could be felt by many of the largest, most widely held stocks – yet another reason why it pays to diversify.
There are few cheaper and easier ways to do that than buying a handful of exchange-traded funds (ETFs). But which ones?
Chances are you don’t have the time to dig through each of the 2,000-plus ETFs that trade in the U.S. alone, so we’re here to help with a short list of funds that serve a wealth of purposes and are downright inexpensive to buy: Our recently refreshed Kip ETF 20. Whether you’re looking for a buy-and-hold-forever bond fund, sector-specific funds to ride Wall Street’s top trends, or something in between, this list is among the best places you can start.