The five biggest gainers in the Dow Jones Industrial Average Tuesday were all cyclical stocks, consistent with an aggressively risk-on market this week.
That was before the market reversed course. President Trump said he would like fiscal stimulus talks to pause until after the election. Still the market is arguably in a more risk-on position than it was before this week.
Before we get to the Dow Jones (still fairly representative of the old American economy), let’s review a few dynamics first:
Growth tech stocks have been pressured this week as economic and inflation expectations are firming up. Large cap U.S. value stocks are up roughly flat in the early going this week. The 10-Year Treasury yield was at 0.66% just a few days ago and was hit 0.78% Tuesday, before falling to 0.74%. The 30-Year Treasury bond yielded 1.42% a few days ago, but hit 1.60% Tuesday, before falling to 1.54%. The yields falling to a level still above last week’s levels indicates investors are still confident in longer-term inflation. The price of crude oil is up over 9% to $40 a barrel this week and the gains held strong Tuesday.
First off, investors largely still thing the V-shaped economic recovery may be able to continue, even if it isn’t perfectly linear. Economic data, including purchasing managers index data in manufacturing and services, has recently shown strong year-over-year gains in September. The labor market is showing signs of resurgence. Stock investors are, for several reasons, overlooking potential election-related and virus-related headwinds. Volatility may be a theme until the election is decided, but the market is in a good mood.
Here were the five biggest gainers in the Dow (up 0.35%) by 1:45 PM EDT Tuesday:
These are all cyclical. IBM and Nike have characteristics are somewhat of a blend of growth and value, as IBM is exposed to the surging cloud market, but still heavily exposed to business spend. Nike is somewhat of an e-commerce play, but its actual products are in favor with consumers when they have better ability to spend.
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