The five biggest Dow Jones Industrial Average gainers in Wednesday’s positive trading action were all value names. In a relatively rare day this year, the few decliners in the index were mostly growth stocks that have powered the U.S. market.
Fundamentally, Wednesday did not look so good.
Economic data rolling in for August has looked weaker than July data. The ADP jobs report for July showed that the economy added a bit over a net 400,000 jobs vs. economists’ expectations of more than 1 million. The unemployment rate, which the Bureau of Labor Statistics will release on Friday, may be falling at a slower rate than it was earlier this year. It had fallen from above 15% to just above 10% of late. But if ADP is accurate, the pace is slowing.
Plus, House Speaker Nancy Pelosi has said repeatedly the new fiscal stimulus bill -- which may give smaller unemployment benefits to laid-off workers than in earlier rounds -- is moving slowly. Supplemental unemployment benefits of $600 a week ran out more than a month ago, threatening the previous pace of the economic recovery.
Still, cyclical stocks lead the market Wednesday, with value far outperforming growth, a sign investors are incrementally more bullish.
Recently, former Vice President Joe Biden’s lead over President Donald Trump in the election polls has narrowed. But more importantly, “there’s probably a higher likelihood that we have some division of Congress,” Dan Eye, head of asset allocation and equity research at Roof Advisory Group for told TheStreet. "That’s the real positive takeaway from investors.” This means if Biden wins, it’s very plausible that corporate taxes would not go all the way to Biden’s preferred 28% from 21%, but rather to something closer to the current rate. As for cyclical, or economically-sensitive stocks, Biden’s individual tax hikes may also be less pronounced, another incremental positive for those stocks.
Here were the 5 biggest winners in the Dow by 2:30 pm EDT Wednesday:
The only losers by 2:30 were Walmart (WMT) - Get Report, Apple (AAPL) - Get Report and Salesforce (CRM) - Get Report. Walmart is mostly still a value stock, but Apple and Salesforce, which have both recently had explosive run-ups, are solidly in the growth category. Apple and Salesforce both fell more than 2%.
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