Stocks mostly rose Wednesday as investors bought the recent dip, and sent the
to a closing record.
The Dow rose 97.31 points, or 0.29%, to close at a new high of 34,230.34. The
added 2.93 points, or 0.07%, to end at 4,167.59, and the
fell 51.08 points, or 0.37%, to close at 13,582.42. The biggest gainer in the S&P 500 was casino-entertainment firm
(ticker: CZR), which saw shares rise 7.8% on news that weekends in Las Vegas are sold out.
Investors snapped up beaten-down shares, a behavior they have frequently exhibited of late. From its all-time high hit Thursday, the S&P 500 fell almost 2% by midday Tuesday, while the Dow fell 0.6% from Thursday’s close to midday Tuesday. Both indexes saw a slight rebound into Tuesday’s close, and the momentum continued through Wednesday.
“There’s buying on the dips,” Jeff Kleintop, Charles Schwab’s chief global investment strategist, told Barron’s. “When there are opportunities, money seems to move into equities to support the markets.”
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That’s been a theme this year, so it wasn’t necessarily surprising to see the dynamic play out Wednesday. Technical analysts have pointed out recently that stock-market pullbacks recently have been minor, as market participants buy shares before they have a chance to fall further.
Notably though, the move up in equities on the day doesn’t necessarily reflect a high degree of investor confidence in the market. Many stocks did not participate in the rally. In fact, only about 56% of S&P 500 stocks rose, according to FactSet data. That’s partly because the first-quarter earnings season remains ongoing, so investors can assess the value of each company on an industry or business-specific basis more. Macroeconomic factors—such as vaccine-led reopenings and trillions of dollars of fiscal stimulus—have already lifted all boats, with 87% of S&P 500 components up so far this year, and the index as a whole sporting an 11% gain.
“Breadth tends to come down during earnings season,” said Kleintop. “The stories become a little bit more stock-specific.”
Buying dips may make sense for now, but don’t just buy any stock.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
